BUSINESS WITH PERSONALITY
10
Issue 1,186 Wednesday 28 July 2010
BRITAIN SET TO
DEFY DOUBLE DIP
UK ECONOMY
▲
BY JESSICA MEAD
BRITAIN will avoid sinking into a dou-
ble-dip recession and its economy will
be expanding at trend growth rates as
early as 2012, a leading think-tank
will say today, adding to the increas-
ingly rosier outlook for the UK and
defusing fears of further economic
contraction.
In its latest forecast for the UK econ-
omy, the National Institute for
Economic and Social Research (Niesr)
predicts GDP growth of 1.3 per cent
this year, 1.7 per cent next year and an
acceleration to 2.2 per cent in 2012.
Strong economic data over the past
week, culminating in an extremely
positive retail sales report from the
CBI, yesterday pushed the pound to a
five-month high of $1.5585.
The CBI said that a net 33 per cent
of retailers were reporting rising
rather than falling sales compared to
last July and are even more optimistic
about the prospects for August. The
survey boosted analysts’ hopes that
the UK can achieve further decent
growth in the third quarter.
However, they remained gloomy
about the long-term prospects –
Capital Economics’ Vicky Redwood
said: “We remain sure that the fiscal
squeeze will slow the consumer recov-
ery eventually – but there’s no sign
that this is happening yet.”
The Niesr also forecasts subdued
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Proudly celebrating 10 years providing bond liquidity to the retail client
TONY HAYWARD: I WAS
DEMONISED OVER SPILL
DUDLEY SET TO TAKE OVER P4-5
Bank governor Mervyn King (left) and chancellor George Osborne and should still be smiling in 2012
growth in consumption with per
capita consumer spending not
expected to recover to its pre-reces-
sion peak until 2015. This is partly
due to the coalition government’s
aggressive fiscal consolidation pro-
gramme and austerity measures such
as the VAT hike.
“Growth will be more dependent
on the contribution of net trade,
while public spending will pose a
drag on economic growth for longer
www.cityam.com
than had previously been expected.
Public sector spending cuts will sub-
tract from economic growth in every
year from 2011 to 2015,” the think-
tank said.
The plans are front-loaded in
spending cuts and consequently, the
think-tank doesn’t forecast unem-
ployment to start falling consistently
until the end of 2011.
The Niesr’s Simon Kirby said: “This
is partly because of public sector job
Picture: REUTERS
losses but even the private sector is
weak at the moment.”
Next January’s VAT increase will
keep inflation above the Bank of
England’s two per cent target until
2012, when the tax hike will drop out
of the annual comparison. This will
make the Bank of England’s message
more difficult, said Kirby, who added
that the Niesr expects rates to start
rising in the second quarter of 2011.
STERLING: P20
1 0 scape
.net
et
GE PAYS
£15M FINE
US GIANT
ACCUSED OF IRAQ
KICKBACKS P2
FREE
Big pension
savers face
new curbs
▲
POLITICS
BY DAVID CROW
PENSION savers who put aside large
sums for retirement are set to be hit
by new plans to sharply reduce the
amount of tax-free contributions they
can make each year – regardless of
how much they earn.
Yesterday, the government outlined
plans to slash the amount a pension
saver can put aside tax free each year
from £255,000 to around £40,000, but
said it would also scrap Labour plans
for a higher earner pensions tax.
Labour was planning to restrict
higher-rate tax relief on pensions for
those earning more than £130,000
gross from April 2011. Under the coali-
tion’s new plans, those earners will
still be entitled to tax relief – but only
up to the new, lower threshold.
The move will affect pension savers
planning to put aside more than
£40,000 in any given year – even if
they intend to do so as a one-off.
Pensions experts welcomed the pro-
posals for being much simpler than
those planned by the previous admin-
istration, but warned that more peo-
ple would be caught under the net.
Raj Mody, pensions partner and
chief actuary at Pricewaterhouse-
Coopers, said: “People looking to save
a significant sum for their pension,
whether regularly or as a one-off, will
now have to reconsider pension plan-
ning regardless of their earnings
level”.
Mody added that the impact would
be greater for final salary scheme
members – with twice as many likely
to be caught.
Certified Distribution
31/05/10 till 04/07/10 is 103,725
 2 News
Honeymoon is over for the coalition
EDITOR’S LETTER
ALLISTER HEATH
IT is time for the markets and
investors to start paying attention to
Westminster once again. Ever since
the election, and especially since the
Budget, sentiment towards the UK has
improved markedly. Gilt yields have
fallen and sterling has soared; the
pound even reached a four-month
high against the dollar yesterday, with
asset allocators now convinced that
the deficit will be brought under con-
trol and that Britain is firmly back on
the road to economic sanity. Better
than expected GDP figures last week
and the widespread view that con-
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Editor Allister Heath
Deputy Editor David Hellier
News Editor Ben Griffiths
Night Editor Katie Hope
Associate Editor David Crow
Lifestyle Editor Zoe Strimpel
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Pictures Alex Ridley
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Commercial Director Harry Owen
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WHAT THE OTHER PAPERS SAY THIS MORNING
SOROS SET TO BUY STAKE IN BOMBAY
EXCHANGE
George Soros, the billionaire investor,
is in final talks to buy Dubai
Holding’s 4 per cent stake in the
Bombay Stock Exchange, as foreign
investor interest in India’s fast-grow-
ing financial markets rises, people
close to the matter said. Soros Fund
Management is planning to pay
about $40m for its stake, valuing
Asia’s oldest bourse at about $1bn,
said a person involved in the negotia-
tions.
THREAT TO OUTSOURCED WORKERS’
BENEFITS
The government is “minded” to scrap
an informal code guaranteeing pub-
lic sector benefits for thousands of
outsourced private sector jobs, threat-
ening a confrontation with unions.
The proposal, aimed at reducing the
cost of outsourcing swaths of govern-
sumer price inflation is slowing have
also done wonders for UK Plc’s reputa-
tion, especially given the continued
question marks over the Eurozone’s
stability in the wake of the stress tests
and America’s uneven recovery.
As so often, however, the consensus
view in the City is faulty – or at least
subject to much greater risks than
most people understand. Everything
is predicated on the coalition staying
on course and delivering all of the
budgetary cleansing it has promised.
Yet even though almost none of the
cuts have actually happened yet – as
opposed to being trailed and debated
ad nauseam – the coalition’s popular-
ity is already in free fall. The honey-
moon period is coming to a
premature end, the strains at the
heart of the coalition are building and
the Labour party is bouncing back in
the opinion polls. Of course, none of
this may matter in the end; all govern-
ments go through wobbles, even
though usually not so soon after a
general election.
GE settles in
bribery case
US REGULATION
▲
BY HARRY BANKS
GENERAL Electric will pay $23.4m
(£15m) to settle bribery charges over
government contracts in Iraq, the US
Securities and Exchange Commission
(SEC) said yesterday.
The SEC alleged that the largest US
conglomerate, and firms it later
bought, paid $3.6m in illegal kick-
backs to Iraqi officials from 2000 to
2003, to win contracts funded by the
United Nations Oil for Food pro-
gramme.
GE neither admitted to nor denied
the charges in agreeing to the settle-
ment, the SEC said.
“GE failed to maintain adequate
internal controls to detect and pre-
vent these illicit payments by its two
subsidiaries to win Oil for Food con-
tracts, and it failed to properly record
ment business from cleaning and
catering to information technology,,
provoked opposition from union rep-
resentatives yesterday.
WORLD BANK WARNS ON FARMLAND
GRAB TREND
Investors in farmland are targeting
countries with weak laws, buying
arable land on the cheap and failing
to deliver on promises of jobs and
investments, according to the draft of
a report by the World Bank. “Investor
interest is focused on countries with
weak land governance,” it said.
SAN MIGUEL SEEKS CAPITAL FOR
DIVERSIFICATION
San Miguel is to sell 1bn new com-
mon shares and raise up to 75bn
pesos ($1.6bn) in fresh capital to fund
investments and acquisitions as it
diversifies into heavy industry and
infrastructure. The Philippine food
and drinks group said it wanted to
sell the common shares for 10 per
cent more than yesterday’s close.
But the polls are undoubtedly start-
ing to look dire for the coalition. The
last three suggest that the Liberal
Democrats have lost much of their
support, Labour is gaining ground –
even in the absence of a leader and
proper opposition team – and the
Tories are insufficiently ahead for
comfort. Ipsos MORI puts the
Conservatives on 40 per cent, Labour
just two points behind on 38 per cent
and the Liberal Democrats on just 14
per cent. An ICM/ Guardian puts the
Conservatives on 38 per cent, Labour
on 34 per cent and the Liberal
Democrats on 19 per cent; and a
YouGov/ Sun poll has the
Conservatives on 42 per cent, Labour
on 35 per cent and the Liberal
Democrats on 15 per cent. The ICM
poll asked voters to grade the coalition
for its performance so far: the average
score was a mere 5.1 out of 10. The
highest (but still paltry) score, 6.6,
comes from Tory voters, followed by
LibDems on just 5.5 and Labour voters
on 4.2. YouGov shows that a peak net
the true nature of the payments in its
accounting records,” said Cheryl
Scarboro, chief of the SEC’s Foreign
Corrupt Practices Act Unit.
GE confirmed the SEC’s statement,
and added that the US Department of
Justice has closed its own separate
investigation.
“This conduct did not meet our
standards, and we believe that it is in
the best interests of GE and its share-
holders to resolve this matter now,”
GE said in a statement.
Kickbacks included cash, computer
equipment and medical supplies.
GE, led by chairman
and chief executive
Jeffrey Immelt, said
the conduct did not
meet its standards
CIVIL SERVANTS ARE TOO EXPENSIVE
TO SACK, SAYS MINISTER
Thousands of civil servants in
Whitehall are “treading water” with
nothing to do because it is too expen-
sive to make them redundant, a min-
ister claimed yesterday. Francis
Maude, the Cabinet Office minister,
sparked a furious row by suggesting
that officials who were not up to
their jobs were twiddling their
thumbs at a cost to the taxpayer of
tens of millions of pounds a year.
SUBSIDIES FOR ELECTRIC CARS TO BE
LIMITED
The government will today scale
back the subsidy scheme for electric
cars.Philip Hammond, the transport
secretary, will announce that drivers
will be able to obtain grants of up to
£5,000 per car from January, but that
the number of grants will be cut.
approval rating for the coalition of +21
per cent has tumbled to just +3 per
cent yesterday. Not great for the gov-
ernment’s prospects. If the electorate
is already so tetchy, how will it feel
after three or four years of austerity?
David Cameron is more of a non-
executive chairman than a hands on
CEO, unlike his recent predecessors,
delegating massive powers to minis-
ters who have been left to push
through reforms in their departments
with limited resources. In some cases,
civil servants are dragging their heels
and even trying to sabotage reform
efforts. Cameron’s lack of attention to
detail is one reason why the coalition
appears to be all over the place, why it
has allowed its opponents to exagger-
ate the scale of the looming cuts, why
its message is often confused and why
there is more and more evidence of
disagreements. Unless Downing Street
begins a proper fightback, the pres-
sure on the coalition from right and
left could soon become unbearable.
allister.heath@cityam.com
Sir John Bond won more than 93 per cent of votes at yesterday’s AGM
Vodafone’s Bond survives
TELECOMS
▲
BY MARION DAKERS
VODAFONE chairman Sir John Bond
survived a shareholder rebellion yes-
terday that tried to oust him from the
telecoms group.
Just 6.5 per cent of shareholders
voted against the re-election of him to
the board yesterday. A further six per
cent also voted against the re-election
of deputy chairman John Buchanan.
But more protest votes had been
expected against what some said is a
JIM ROGERS PREDICTS A GLOBAL
RECESSION BY 2012
Jim Rogers, the market sage, has
warned the global economy is just
two years away from another reces-
sion, but remains ill-prepared to cope
with the after-effects. Rogers, the
respected currency trader and hedge
fund pioneer, cautioned that when
the downturn takes hold “the world is
going to be in worse shape because
the world has shot all its bullets”.
RECORD NUMBER OF FAKE £1 COINS
COULD FORCE REISSUE
There are now so many fake £1 coins
in circulation the Royal Mint could be
forced to scrap and reissue the entire
denomination. Their warning came as
new figures indicated there were
£41m fake £1 coins in Britain – one in
every 36 in circulation. This suggests
the proportion of fake coins had
tripled in the last decade.
CITYA.M. 28 JULY 2010
NEWS | IN BRIEF
LVMH profit shows luxury is back
French luxury goods behemoth LVMH
Moet Hennessy Louis Vuitton reported a
53 per cent jump in first half net profit
yesterday, suggesting a strong return of
high-end consumption. The world's
largest luxury goods company posted
net profit for the first six months of
€1.05bn (£875m), up from €687m a
year ago as all divisions posted double-
digit revenue growth. The 33 per cent
rise in profit from recurring operations
to €1.8bn was eight per cent higher than
analysts’ expectations.
CBRE sees concrete growth
CB Richard Ellis, one of the world's
largest commercial real estate service
companies, posted a second-quarter net
profit yesterday and its strongest rev-
enue growth since 2007. The company
said its net income was $54.8m
(£35.2m), compared with a net loss of
$6m a year ago after a major restruc-
turing. Revenue for the Los Angeles-
based company rose 23 per cent to
$1.2bn. Analysts, on average, had
expected $1.1bn. Global property sales
increased by 61 per cent, led by a 93 per
cent improvement in sales in Europe.
Picture: PA
poor company strategy that has dam-
aged the firm’s value.
The protesters were led by the
Ontario Teachers’ Pension Plan,
which holds 0.4 per cent of the stock.
It went public last week with com-
plaints over the firm’s “significant
structural and strategic weaknesses”
and “disastrous” acquisition record.
Bond said at the company’s AGM
that the board was regularly review-
ing the firm’s minority stakes in
other companies after shareholder
complaints.
TURKEY CUTS INFLATION OUTLOOK
Turkey’s central bank yesterday
issued a benign forecast on inflation,
interest rates and a gathering eco-
nomic recovery as the country's stock
prices were soaring to a record high.
The country’s central-bank governor,
Durmus Yilmaz, delivered a dovish
report, cutting the bank's estimate for
2010 and 2011 inflation.
ALLIANCE AIMS FOR APP MARKET
A global alliance of telecom operators
said yesterday it will establish a corpo-
rate entity as part of its plans to set up
an open platform for mobile applica-
tions, hoping to broaden the market
and emulate the success of Apple’s
App Store and Google’s Android
Market. The Wholesale Applications
Community was launched in
February as a joint venture between
24 operators, including US-based
AT&T.
CITYA.M. 28 JULY 2010 News 3

Manchester United may face

probe into its season tickets
A source close to the matter said: with the club relaxing the rules to

▲
EXCLUSIVE
BY STEVE DINNEEN
MANCHESTER United could face an
anti-competition appeal over the way
it sells season tickets, City A.M. has
learned.
A top City law firm is looking into
the way the Old Trafford club bun-
dles European and cup games with its
season tickets, forcing fans to shell
out more if the team progresses.
“The club is in a dominant position as
far as these tickets go – it’s not like
you can just go and support
Manchester City if the prices go up.
“The way tickets are bundled – tak-
ing the dominant product and forc-
ing people to buy something they
might not want – is a potential abuse
of that power.”
The Office of Fair Trading was
asked to look at the issue last year,
exclude unpopular Carling Cup
games but this did not go far enough
for some fans.
It is the latest setback for the club,
which was forced to place 4,000 sea-
son tickets on general sale after fail-
ing to shift them. United – which has
endured a dogged fans’ campaign
against its American owners – has
frozen the price of its season tickets
this year.

Tomkins boss Jim

Nicol is under
fire from a share-
holder

Tomkins gets
flak for £3bn
takeover deal
shadow of a doubt, too low, and also
▲

INDUSTRIAL
BY OLIVER SHAH
INDUSTRIAL components manufac-
turer Tomkins faced another
headache from one of its leading
shareholders yesterday after recom-
mending a £2.9bn takeover offer
from a Canadian consortium.
Tomkins chairman David
Newlands urged investors to accept
the 325p per share bid from private
equity player Onex and the Canada
Pension Plan Investment Board, say-
ing it reflected “both the value of the
group today and its future potential”.
But David Cumming of Standard
Life Investments, which owns nearly
three per cent of the company, made
a second appeal to other shareholders
not to back the takeover. He said: “In
contrast to the chairman, we do not
expect the majority of Tomkins share-
holders to support a deal whose valu-
ation of the company is, without a
provides massive incentives to the
outgoing management team to deliv-
er returns to private equity rather
than to current shareholders.”
Cumming’s remarks will strike a
chord with smaller shareholders who
have accused chief executive Jim
Nicol of working too closely with the
Canadian investors during the
process. Management will take up to
a 15 per cent equity stake in Tomkins
if the deal goes through.
Tomkins needs 75 per cent
approval to seal the buyout. It already
has the backing of Schroders, its
largest shareholder, and JPMorgan
Asset Management. Some minor
holders known to be negative on the
deal, such as Artemis, have sold out.
The board claimed the valuation
was justified because the company
had become too exposed to the US
consumer in recent years and faced a
weak second half in 2010.

Byers has been supported by Barry

ADVISER
JPMORGAN
CAZENOVE
TOMKINS was advised by a
JPMorgan Cazenove team lead by
head of corporate broking Ed Byers.
Byers is also advising International
Power on its deal with GDF Suez and
has a long list of transactions to his
belt, including the buyout of UK glass
maker Pilkington by Japan’s Nippon
Sheet Glass in 2006 and Marconi’s
£1.2bn sale to Ericsson in 2005.
Weir, a veteran mergers & acquisi-
tions banker, and Patrick Magee.
They were up against a Citigroup
team working for Onex and the
Canada Pension Plan Investment
Board led by Philip Robert-Tissot.
Robert-Tissot has advised on high-pro-
file takeovers such as Kraft’s siege of
Cadbury and Spanish operator
Ferrovial’s $30bn (£19bn) purchase of
British airports firm BAA in 2006.
More recently, Robert-Tissot
advised power generator Chloride on
its takeover by US player Emerson.
Also working on the Citi side was
Grant Kernaghan, who guided out-
sourcing company Xchanging through
its £530m flotation in 2007.
 4 Focus on BP
Hayward: I was vilified over spill
BP IN CRISIS
BY EMMA SADOWSKI
OUTGOING BP boss Tony Hayward
yesterday claimed he was “demonised
and vilified” over the firm’s Gulf of
Mexico oil spill crisis.
But the embattled leader, who is
set to hand over the chief executive
role in October to BP’s managing
director Bob Dudley, accepted the
company could not move forward
with him at the helm.
“This is a very sad day for me per-
sonally,” he said. “Whether it is fair or
unfair is not the point. I became the
public face [of the disaster] and was
demonised and vilified.”
He added: “BP cannot move on in
the US with me as its leader... Life
isn’t fair... Sometimes you step off the
pavement and get hit by a bus.”
Hayward, 53, confirmed his depar-
ture and his nomination as a director
of TNK-BP, the company’s Russian
joint venture. He is taking a year’s
salary of £1.045m and will be able to
claim a yearly pension of £600,000
from his 55th birthday.
Dudley, who took over as the public
face of BP’s response to the spill six
weeks ago, pledged yesterday to
shake up the company’s culture to
improve safety and reliability in an
effort to restore BP’s reputation fol-
lowing the spill.
Meanwhile, BP caused further out-
rage by revealing Hayward will not
testify at a US Senate hearing on BP’s
role in the release of Lockerbie
bomber Abdelbaset Ali al-Megrahi.
The hearing, set for tomorrow, on
whether BP influenced the release of
the Lockerbie bomber, was yesterday
postponed, with US senators saying
key witnesses had “stonewalled” the
investigation by refusing to appear.
CITYA.M. 28 JULY 2010
OTHER TOP BOSSES FORCED TO RESIGN
SIR PHILIP WATTS
Sir Philip Watts, the former chief execu-
tive of Royal Dutch Shell, was forced to
quit after he overstated the group’s oil
reserves by 20 per cent, knocking more
than £15bn off Shell’s market value.
Watts was forced to quit in 2004.
SIR FRED GOODWIN
Dubbed the “world’s worst banker”, for-
mer Royal Bank of Scotland (RBS) boss
Sir Fred Goodwin was forced to stand
down after being blamed for the near
collapse of the bank. Goodwin left in
2008.
GERALD RATNER
Former jewellery boss Gerald Ratner
was forced to leave the Ratner Group
after a 1991 slip up in which he referred
to his products as “total crap”, wiping
an estimated £500m from the compa-
ny’s value. He now runs Geraldonline.
CITY VIEWS: DID TONY HAYWARD MAKE THE RIGHT
MOVE? Interviews by Emma Sadowski
CHRIS HOPKINS | LLOYD’S OF LONDON
“From a PR perspective, it was a smart
move, especially putting an American
at the top of running the show. Tony
Hayward made one too many gaffes
and shot himself in the foot. As a com-
pany you always want your head
to be more of a political fig-
ure.”
RAFIQUE AHSANOLLAH | CHARTIS
“I don’t think it was Tony Hayward’s
fault, but as the leader of BP he
should have had a contingency plan
put into place. However, I sit on the
fence when it comes to his intentions.
A noble thing to do is not take the
payout, especially because of
the $17bn loss.”
COLIN COOPER | ROYAL BANK OF SCOTLAND
“Yes, the right decision was made
because Tony Hayward made a series
of catastrophic blunders. Someone
had to take responsibility for the Gulf
disaster and for someone who is get-
ting paid so much and is as educated
as Hayward, it had to be
him.”
CITYA.M. 28 JULY 2010 Focus on BP 5

Greenpeace launches a CORPORATE LOSSES |

THE WORST IN UK HISTORY

London protest as closes ROYAL BANK OF SCOTLAND

announced the biggest corporate loss
in UK history when it posted a

almost 50 petrol stations

£24.1bn deficit for 2008, largely due
to its ill-timed acquisition of ABN Amro.

VODAFONE GROUP lost £14.85bn in

From left: departing chief
executive Tony Hayward,
chairman Carl-Henric
Svanberg and incoming chief
Bob Dudley.
BP IN CRISIS
BY EMMA SADOWSKI
GREENPEACE launched an attack on
BP yesterday after shutting down 46
out of the group’s 50 petrol stations
in central London.
The environmental group said that
it had sent more than 50 activists to
shut off the power at petrol stations
through out the capital in the early
hours of yesterday morning to coin-
cide with the release of BP’s second
quarter results.
John Sauven, executive director at
Greenpeace told City A.M. that the
event was to “show BP that it needs to
look at the bigger picture”.
“We have shut nearly every station
in London to get across the bigger pic-
ture. The key issue is that this is the
second change at the top after some
kind of controversy. The ball is now in
BP’s court to truly become beyond
petroleum and to invest in alternative
energy,” said Sauven.
Greenpeace managed to stop
motorists from filling up at BP petrol
stations after its activists shut off
pump safety switches and removed
them, preventing the stations from
opening.
BP called the act “childish and irre-
sponsible”.
“The action shows a total disregard
for the safety of motorists and staff at
the sites,” said a BP spokesperson.
Greenpeace said the protests are in
response to BP’s plans to tap into
Canada’s oil sands and drill in the
Arctic.
Sauven said: “The moment has
come for BP to move beyond oil.
Under Tony Hayward the company
went backwards, squeezing the last
drops of oil from places like the Gulf
of Mexico.”
During the protests, the volunteers
replaced BP’s logo with an altered
logo showing its green and yellow
sunflower sinking into a sea of oil.
2006 after it wrote down £28bn on
historic investments.
LLOYDS BANKING GROUP on 13
February said its HBOS unit made a
pre-tax loss of £8.5bn for 2008.
CABLE & WIRELESS said in 2003 it
plunged to a £6.5bn annual loss.
MARCONI reported a first-half pre-
tax loss of £5.12bn in 2001.
LLOYD'S saw losses of £2.9bn in
1990.
INVENSYS in 2003 lost an estimated
£1.44bn.
BRITISH AEROSPACE made a 1992
pre-tax loss of £1.2bn.
QUEENS MOAT HOUSES lost £1.04bn
in 1992.
ABBEY NATIONAL made a pre-tax
bottom-line loss of £984m in 2002.

BP reports a record
$17bn quarterly loss
BP IN CRISIS
BY EMMA SADOWSKI
BP IS to launch a $30bn (£19bn)
asset sale in a bid to offset some of
the Gulf of Mexico spill costs after
the group reported record quarter-
ly losses of $17bn for the last three
months, one of the worst in corpo-
rate history.
The asset sale, mainly in BP’s
upstream business is likely to take
18 months to complete and will see
BP shed over 10 per cent of its
$250bn asset base – a threefold
increase on its initial $10bn target.
BP said the sales will leave the
group’s portfolio looking leaner
but with a “higher quality explo-
ration and production business”.
Bob Dudley, the group’s incoming
chief executive said BP will emerge
a smaller and wiser company as a
result.
Reporting its second quarter
results yesterday, BP revealed it has
set aside $32.2bn, including the
$20bn escrow fund, to pay for the
Gulf oil spill response.
“We expect we will pay the sub-
stantial majority of the remaining
direct spill response costs by the
end of the year. Other costs are like-
ly to spread over a number of years,
including any fines and penalties,”
said outgoing chief executive Tony
Hayward.
Included in the spill provision is
$2.9bn for the cost of the response
and $29.3bn for future costs.
The impact of the Gulf catastro-
phe has already wiped more than
£50bn off of BP’s market value. The
group’s shares closed three per
cent lower at 404.85p yesterday.
Investors had cheered reports of
Hayward’s imminent departure on
Monday, sending BP shares up
nearly five per cent.
“The costs and charges involved
in meeting our commitments in
responding to the Gulf of Mexico
oil spill are very significant and
this reported loss reflects that,”
said Hayward.
However, BP’s underlying per-
formance, excluding the spill, was
strong in the second quarter, with
profits of $5bn and operating cash
flow of $8.9bn, up 31 per cent from
the same period of 2009.
US OIL DRILLING BILL: P16

Beneath the spill, things are robust

LOOK beneath the oil spill, and
BP’s underlying performance in
the second quarter was actually
rather strong. Perhaps manage-
ment redoubled their efforts to
try and get investors to cut them
some slack. In that respect, they
failed: the shares closed virtually
flat yesterday.
Stripping out $21.9bn worth of
post-tax charges related to the
spill, the oil major managed to
meet most analyst expectations.
Exploration & Production booked
$6.2bn in profit, against $4.9bn in
the same period last year, as a 39
per cent increase in prices more
than offset a four per cent dip in
volumes.
In Refining & Marketing (the
petrol stations side of the busi-
ness), the company staged a with a moratorium on off-shore
remarkable comeback, posting a drilling could hurt production
$1.7bn profit compared to $1bn a down the line. And if the dividend
year ago. does return, it could be a shadow
Cash generation was good, of its former self.
which is just as well considering
the black hole it is throwing ANALYSIS l BP
money down at the moment. It p
600
generated $6.8bn in the quarter, 404.85
and spent $2.1bn of that on the 27 Jul
500
spill effort.
Reducing the debt pile, which
shrunk from $25.2bn at the end 400
of March 2010 to $23.2bn at the
end of June, will also help the 300
group cope with the huge costs of
the Gulf disaster, as will its dispos- 3 May 21 May 10 Jun 30 Jun 20 Jul
al of $30bn of assets.
Quite what this means for the
future shape of the oil major is
unclear. Asset disposals coupled
BOTTOMLINE
Analysis by David Crow
 6 Politics
Miliband the elder is Labour’s best chance
DAVID CROW
POLITICAL EDITOR
T
HERE are few things duller than
a Labour leadership contest. The
five rivals have been travelling
the length and breadth of the
country, delivering exactly the same
stump speech at a never-ending series
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of hustings. It’s a running joke among
the contenders that they know each
other’s scripts off by heart, not just
their own. Ed Miliband, the insurgent
that took on heir apparent and elder
brother David, does a particularly
good job of mimicking the others.
Andy Burnham, the self-styled work-
ing class candidate, normally tries to
rouse the crowd with a heart-felt repu-
diation of Tony Blair’s New Labour,
that election-winning machine that
kept the party in power for 13 years,
but which the party hates so much. “If
you’re not New Labour, or Next
Labour, but Our Labour – be part of my
campaign,” he says.
This statement sums up everything
wrong with the leadership contest,
which has descended into an orgy of
navel-gazing that interests no-one out-
side the Labour party. In fact, “Next
Labour” – or Newer Labour – is the best
chance the party has of seizing power
if the coalition does indeed split.
Instead, nearly all the candidates are
focusing on Our Labour (read Their
Labour), on capturing the hearts and
minds of core voters in the party’s
heartlands. They would do well to
remember it wasn’t a collapse in the
core vote that lost Labour the last elec-
tion: its share of the vote actually went
up in Scotland; it fought hard against
a Tory incursion into the North ; and it
stopped inner London turning blue.
No, Labour lost almost a hundred
seats because it failed to win in the
South East, East Anglia and the South
West, areas that are home to aspira-
tional middle-class voters who work in
the private sector and read the Daily
Mail. The problem was all too appar-
ent at a drinks reception for Labour
bigwigs and journalists earlier this
week. Ed Miliband (the only contender
who turned up) surrounded himself
with hacks from the New Statesman
and Tribune, lecturing them in wonk-
ish language that sounded like non-
sense to other guests; journalists from
the Daily Mail, Daily Express and Sun
were left well alone (most went home
early, long before the warm white
Huhne backs
new nuclear
power plants
▲
POLITICS
BY DAVID CROW
CHRIS Huhne, the energy secretary,
threw his weight behind new nuclear
energy yesterday, reversing years of
Liberal Democrat opposition to
nuclear power.
Huhne said a nuclear building pro-
gramme would be “on track by 2018”,
suggesting the government will move
faster than originally thought.
The Institute of Directors wel-
comed the announcement, but called
on the government to introduce a
fast-track planning process.
“We are pleased Chris Huhne has
stated unambiguously that new
nuclear will play a part in meeting
the UK’s energy needs. The message
from business to this government is
unambiguous: deal with the energy
security problem and start dealing
with it now,” said Graeme Leach,
director of policy at the IoD.
Huhne also said Britain may need
to double its electricity supply and
virtually eliminate emissions from
power stations by 2050 if it is to meet
legally binding climate change tar-
gets.
Lords to quiz Big Four auditors
over their role in banking crisis
▲
POLITICS
THE HOUSE of Lords has launched a
wide-ranging review into the role of
the Big Four accountants in the
financial crisis.
The economics affairs committee
will probe auditors PwC, Ernst &
Young, KPMG and Deloitte over
whether they could have done more
to alert investors to the risks in the
banking system.
The review piles more pressure on
the accountants, who have already
been criticised for their “worrying
lack of skepticism” when auditing
financial institutions by the Financial
Services Authority.
CITYA.M. 28 JULY 2010
wine ran out).
If any of the candidates gets
Labour’s need to reconnect with the
middle class majority, it is David
Miliband. He alone understands how
far to the left the party has shifted
since the departure of Blair, a man
who said he didn’t want David
Beckham to earn less money – and
meant it, who shared Michael Gove’s
zeal for education reform and Iain
Duncan Smith’s ambition to shrink
the welfare state. I suspect that when
the second preference votes are count-
ed, it is younger brother Ed who could
emerge victorious. That would make
an early exit from the wilderness
much less likely.
Delivering the coalition’s first
statement setting out energy policy,
he said the “era of cheap, abundant
energy is over”.
Industry, heating and transport
will use more electricity instead of oil
and gas as the government seeks to
cut greenhouse gas emissions by 80
per cent by 2050 from 1990 levels.
Failure to build a low-carbon econo-
my would leave Britain vulnerable to
volatile oil prices, more reliant on
imports and exposed to insecure
energy supplies, Huhne added. The
statement set out 32 ways to move
away from fossil fuels and become
more energy efficient.
“We must find ways of making
energy go further,” Huhne said. “Even
as we reduce overall demand for ener-
gy, we may need to meet a near dou-
bling in demand for electricity.”
Energy bills will “rise considerably”
in the coming years, the report said,
although Huhne said it was hard to
put a figure on the expected rises.
Plans for new “smart” electricity
meters that allow people to monitor
their consumption more closely
could be brought forward to 2018
from 2020.
The issue of competition between
the firms is also under investigation
by the House of Commons Treasury
Committee, and the Financial
Reporting Council said in June that
competition in the industry was
insufficient.
Lord MacGregor, chairman of the
Lords committee, said: “The auditing
industry has been dominated by a
very small number of players for
some time now. We will look at the
scope for promoting more competi-
tion.”
The Lords are inviting responses to
the probe by 24 September, and will
make recommendations later in the
year.
CITYA.M. 28 JULY 2010 Politics 7

Cable immigration blunder

overshadows PM’s India trip
negotiate on plans for an immigra- India is worried that a cap on eco-

▲
POLITICS
BY DAVID CROW
THE Prime Minister’s visit to India got
off to a shaky start last night, after
Vince Cable made off-message com-
ments about the coalition’s immigra-
tion policy, which has become a
hot-button issue in the emerging
superpower.
Cable, the business secretary, said
the government was not willing to
tion cap, but admitted he would pre-
fer a more “liberal” approach.
He said: “It’s no great secret that in
my department and me personally,
we want to see… as liberal an immi-
gration policy as it’s possible to have.
“We obviously have to listen to
Indian concerns on the matter... I
have met Indian businessmen in the
UK who express concerns about this,
and they are not the only ones.”
nomic migrants from outside the EU
could reduce opportunities for Indian
graduates. Earlier this month, Anand
Sharma, the country’s commerce
minister, told Cameron he had con-
cerns over the policy.
Cameron and chancellor George
Osborne are leading a delegation of
senior cabinet ministers and high-
profile business figures to India, in a
bid to boost trade with the country.

David Cameron last visited India in 2006 Picture: PA

UK owes £1bn
extra on PFIs
finance at current rates will be value
▲

ECONOMICS
BY MARION DAKERS
PUBLIC spending came under fresh
scrutiny yesterday, after new figures
suggested taxpayers will shell out up
to £1bn extra over the next 30 years to
pay for PFI projects, while the state
struggles to reverse a decline in pro-
ductivity.
The running costs of Private
Finance Initiatives (PFI) agreed during
the credit crisis will be between
£500m and £1bn, said the National
Audit Office (NAO), though it said the
schemes represented good value for
money for boosting the economy.
Analysis by the NAO suggested that
the higher lending costs during the
credit crunch were responsible for
pushing the cost of PFI schemes up by
six to seven per cent.
The NAO warned that in the future
the government “should not presume
that continuing the use of private
for money”.
“The Treasury helped reactivate
the market and prevent the stalling
of many government projects,” said
auditor general Amyas Morse. “[But]
now that the market is providing
finance again, a project-by-project
review should be carried out using
stricter criteria to establish the most
appropriate funding methods.”
Meanwhile, the Office for National
Statistics said productivity in the pub-
lic sector fell by 0.9 per cent in 2008,
ending several years of modest rises.
The ONS measured two-thirds of
State workers by comparing results
such as NHS targets with inputs of
labour, materials and capital assets.
The ONS said public sector output
has failed to keep up with a total
input increase of 41.5 per cent since
1997. Productivity since Labour
gained power fell by an average of 0.3
per cent per year.

Labour spent £500m on PR

and advertising despite slump
accounts yesterday.
▲

POLITICS
BY DAVID CROW
THE Labour government spent a stag-
gering £500m on advertising cam-
paigns and PR in 2009-10, even as the
public finances were spiralling out of
control.
The Central Office of Information –
which is responsible for government
marketing and communications –
made the admission in its annual
Francis Maude, minister for the cab-
inet office, seized on the revelations as
proof of Labour’s economic misman-
agement, and said only the most
essential campaigns would go ahead
in the future.
He added: “Spending over half a bil-
lion pounds on communication when
the government’s finances were in
such a mess is inexcusable. We have a
higher regard for taxpayers’ money.”
 The Capitalist
8 CITYA.M. 28 JULY 2010
CITY HEADS OUT FOR A GLORIOUS
WEEK OF RACING AT GOODWOOD
HORSERACING fanatics in the City
have abandoned ship again this week
to head over to Glorious Goodwood,
running all week until Saturday.
Around 100,000 attendees are expect-
ed to descend on Goodwood over the
course of the festival, with the Tote
estimating its potential winnings at
£2.75m from 300,000 bets.
Schmoozing at the first day of the
racing yesterday – alongside the likes
of actress Liz Hurley, a guest of
Highclere Thoroughbred Racing boss
Harry Herbert, and rugby legend
Laurence Dallaglio – were Sir Peter
Osborne, father of the chancellor and
founder of interior design company
Osborne & Little, and John Dodd,
founder of new sponsor Artemis
Investment Management.
Later in the week will bring high
hopes for Andy Stewart – who retired
EDITED BY
VICTORIA BATES
GOT A STORY? EMAIL
thecapitalist@cityam.com
from Cenkos just last week – in the
form of his horse Fleeting Spirit.
But perhaps in with the best
chance of all the City lot this week is
Paul Roy, the former president of
global markets and investment bank-
ing at Merrill Lynch who set up
investment firm NewSmith Capital
Partners in 2003. Roy is also chair-
man of the British Horseracing
Authority and a keen racehorse
Paul Roy’s Canford Cliffs is the favourite to win the Sussex Stakes today
owner in his spare time – and his nag,
Canford Cliffs, is the favourite to win
Goodwood’s flagship race, the
£300,000 Sussex Stakes, later on
today. Roy himself, however, won’t be
biting his nails in the thick of the
action – he’s chosen to head off on a
summer holiday instead. SPORT: P26
FILM REEL
First Goldman’s making a movie
about itself, and now everyone’s hop-
ping on the bandwagon.
The name Ross Mandell might be
familiar to some readers, since the
former boss of Sky Capital Holdings
was accused by US authorities last
summer of running a “trans-Atlantic
boiler room” scam – something for
which he has not yet been tried, and
which he vehemently denies.
Mandell’s idea is to create a reality
TV show about himself, his wife and
children in order to clear his name.
He claims already to have television
producers lining up to cut a deal for
the show, which is provisionally enti-
tled “Facing Life”.
“People think that I’m a beast, that
I’m an animal,” he tells Reuters. “I’m
not. I’m a loving human being, I’m a
sober man, I’m God-fearing and a
member of Alcoholics Anonymous.”
FOND FAREWELL
A piece of sad news for the City, after
Jupiter fund management veteran
Laurie Petar passed away at the week-
end from prostate cancer. Petar, who
managed the firm’s fund of invest-
ment trusts and monthly income
fund, had continued to run his funds
throughout his long illness. Jupiter
chief executive Edward Bonham
Carter paid tribute, saying: “Laurie
will be greatly missed by all who
knew him at Jupiter, where he was
both a valued col-
league and a friend.”
DOG’S LIFE
Billionaire Metro
Bank founder
Vernon Hill’s little
Yorkshire terrier,
Duffy, is fast becom-
ing a bigger
ambassador for
the bank than
his owner. I
hear there’s
a sizeable
portrait
gracing the
reception
on the first
floor of the
firm’s new
Holborn office, featuring
Picture: REX
Hill, his wife Shirley and Duffy, all
encased in a gaudy shiny frame.
Next thing you know, that furry
face will be gracing the bank’s cus-
tomer documents.
BLUE PLANET
Forget shareholder activists: it’s ani-
mated movie characters that board-
members at mining giant Vedanta
need to watch out for at its annual
meeting later today. Vedanta, you
may recall, has been involved recently
in a lengthy spat with charity Survival
International over its attempts to
Vedanta faces a threat from Avatar’s Na’vi
mine on land in India belonging to a
native tribe, the Dongria Kondh.
Survival now plans to take protes-
tors dressed up as the blue people
from the Avatar movie along to the
AGM in Westminster. “The Dongria
Kondh have been described as the
‘real Avatar tribe’ because their plight
closely parallels that of the aliens in
James Cameron’s blockbuster”, a
spokesman informs me, solemnly.
STREET FIGHTING
Trivia of the day, courtesy of a plan-
ning and transport committee
meeting of the City of London.
The corporation yesterday
approved a request from
Islington Council to include
three City boundary roads in
its 20mph speed limit,
though with one condition
attached – a request for a
road name change.
Apparently, some members
of the corporation have been
gunning for 21 years – no
joke – to secure a change of
name for Goswell Road,
which runs between Angel
and the Barbican. The rea-
son? The City traditionally
doesn’t have any roads,
since “roads” are strictly
highways that lead to urban
areas, while highways in
those areas are “streets”.
Nothing if not sticklers for
ttradition, these folk.
CITYA.M. 28 JULY 2010 News 9

TOYOTA RAMPS UP OVERSEAS PRODUCTION

Connaught caught up in FSA
probe over reporting speed
financial state. Its profit warning on before the profit warning. The FSA

▲
PROPERTY
BY MARION DAKERS
SHARES in housing repair firm
Connaught remained in the dol-
drums yesterday as details of the
reported Financial Services Authority
investigations emerged.
The FSA is thought to be focusing
on whether the beleaguered compa-
ny was prompt enough in telling the
stock market about its worrying
25 June led to shares plummeting 93
per cent in the space of a month.
A spokesperson told City A.M. yester-
day: “The company has not received
notification of a formal investiga-
tion.” The FSA is believed to be have
made informal enquiries.
Connaught’s Northern managing
director is also believed to be under
close FSA scrutiny for selling off
£265,000 worth of shares just days
declined to comment.
The company remains in talks with
lenders, led by Royal Bank of
Scotland, to extend borrowing from
its current overdraft limit of £200.6m.
Analysts yesterday questioned why
the company issued positive manage-
ment statements less than three
weeks ago, claiming the board “fully
expects to be able to operate within
our existing covenant levels”.

TOYOTA will expand its production in China, Brazil and the US after the strength of the
yen made it more costly to make vehicles at home. Atsushi Niimi (above), executive vice-
president, said output would be cut to 70 per cent of its domestic capacity. The company
produced 1.71m vehicles from January to June, up 55.1 per cent from a year ago.

AirFrance is
back in profit
▲

TRANSPORT
Revenue rose 10.7 per cent to €5.72bn,
BY MARION DAKERS also ahead of analyst expectations,
AIRFRANCE-KLM returned to quarter- which the firm credited to strong
ly profit yesterday, thanks to a recovery in both passenger and cargo
€1.34bn (£1.1bn) gain from its stake in traffic. The firm reiterated its target
newly-listed travel booking firm to break even at the core operating
Amadeus. level in 2010-11 but did not mention
Europe’s biggest airline reported a whether this excluded the impact of
net profit for the three months to the pre-2009 fuel hedges -- a proviso
end of June of €736m, compared to a included in its last earnings report in
loss of €426m in the same period a May.
year ago.
Operating profit remained in the ANALYSIS l Air France-KLM
red, with a loss of €132m in the quar- 12.5 €
ter, though the result was better than 10.95
27 Jul
analysts’ predictions. The Franco- 11.5
Dutch group posted its worst annual
performance for 15 years in May,
10.5
reporting a €1.56bn loss.
The airline group said it would
have made a marginal profit without 9.5
April’s travel chaos caused by volcanic
ash. The firm also saw a faster-than- 8.5
expected upswing in cargo transport. 3 May 21 May 10 Jun 30 Jun 20 Jul

Goldman Sachs and Credit Suisse

Fantastic Deals on Travel Insurance
snap up stakes in Bank of Moscow š

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BANKING
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Sachs and Credit Suisse have bought
small stakes in state-run Bank of
Moscow, an encouraging sign for
Russia as it considers a broader sale of
the state’s financial assets.
As part of a $29bn (£18.6bn) fund-
raising effort to plug gaps in the
budget, Russia is looking at the sale of
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cap of $5.1bn, according to Reuters We fly from Gatwick. We also fly from Stansted to Munich. Price correct as at 19 July 2010. Flights available to book
data. Earlier this month it sold 2bn now for travel between 19 July and 30 October 2010. easyJet is an Appointed Representative of Mondial Assistance
roubles (£467m) of additional shares (UK) Limited which is authorised and regulated by the Financial Services Authority (FSA). Variable charges for hold
to private and public investors at baggage apply and some payment methods attract a handling fee. See website for details.
1,003 roubles per share.
 10 News CITYA.M. 28 JULY 2010

Liberum profits
Investment buoyed after
banking drags new client wins

on Deutsche
BANKING

s
LIBERUM Capital saw revenues surge
in the first half of the year as the bou-
ANALYSIS l Deutsche Bank tique investment bank landed its first
54 € 52.64 major mandates advising companies
27 Jul joining the full list of the London
52 Stock Exchange.
s

BANKING
BY VICTORIA BATES
DEUTSCHE Bank yesterday trod the
same beaten path as its large US rivals
as it revealed a jump in second quar-
ter profits had been dampened by
weakness in its investment bank.
Deutsche said pre-tax profits came
in at €1.5bn (£1.25bn) for the three
months to June, up 16 per cent on the
€1.3bn it reported in the same period
last year. The bank, like its peers, has
seen provisions for credit losses ease
substantially over the past year, put-
ting aside just €243m in the second
quarter compared to €1bn in the
same three months of 2009.
However, chief executive Josef
Ackermann admitted that the bank
“followed the overall industry trends
with weaker profitability in invest-
ment banking, which was driven by
investor concerns and heightened
volatility”. The corporate banking
and securities division posted rev-
enues of just €3.6bn over the quarter,
21.7 per cent lower than last year.
Deutsche also bowed to public pres- Earlier this month, Liberum acted
50
sure by revealing its level of sovereign as co-manager to Vallar, the cash shell
debt exposure, after it came under 48 set up by financier Nat Rothschild, on
attack for withholding the informa- its admission to the main market,
tion following the European stress 46 raising £707.2m. The firm also
tests on Friday. The bank said it had advised emerging markets-focused
44
net exposure of €1.1bn to Greece, 3 May 21 May 10 Jun 30 Jun 20 Jul mining services group Capital
€1bn to Spain and €8.1bn to Italy – Drilling on its IPO at the start of June.
more than double the exposure fig- Deutsche Bank’s Josef Ackermann was cautiously bullish on a recovery Picture: REUTERS The ambitious approach to win-
ures it released in May, calculated ning clients has boosted the firm’s
under its own risk models rather APRIL TO JUNE | DEUTSCHE BANK SECOND QUARTER RESULTS results over the first half of the year,
than the stress test methodology. with revenues up 64 per cent to £20m
Arturo de Frias, an analyst at Pre-tax profit: s €1.5bn (2009: €1.3bn) compared to the first half of 2009.
Evolution Securities, said: “The only Net revenue: t €7.2bn (2009: €7.9bn) Gross profit prior to the annual
one that would concern me is Greece, Corporate banking and securities bonus round was £7.5m, double the
as we do expect a default at some Pre-tax profit: t €779m (2009: €823m) £3.8m it made last year.
point in the next couple of years. But Liberum was set up in 2007 by
it is a relatively small thing for Net revenue: t €3.6bn (2009: €4.6bn) Shane Le Provost, the former chief
Deutsche and disclosure brings confi- Global transaction banking executive of Collins Stewart. It has
dence, so the figures won’t worry any- Pre-tax profit: s €478m (2009: €187m) since grown rapidly and now employs
one too much.” Net revenue: s €1.07bn (2009: €654m) around 130 people in London and
Despite the group’s investment Asset and wealth management New York, acting as broker to a roster
banking woes, Ackermann was cau- Pre-tax profit: s €45m (2009: –€85m) of 25 corporate clients.
tiously optimistic on the prospects of Net revenue: s €969m (2009: €617m) Chief executive Simon Stilwell said:
a global recovery, claiming that “the Retail banking “We have a strong pipeline of deals,
current economic momentum is like- Pre-tax profit: s €233m (2009: €55m) we have the right people and are well
ly to continue over the remainder of placed to build on what has been an
the year”. Net revenue: s €1.44bn (2009: €1.41bn) excellent year to date.”

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CITYA.M. 28 JULY 2010 News 11

Aldermore to open
UBS chief executive
ANALYSIS l UBS Oswald J. Grübel
17 CHF
17.46
27 Jul expects the bank
will resolve tax
16 haven disclosures

a bank in Reading
with US authorities
by the autumn.
15

14

14 Dec 6 Jan 26 Jan 15 Feb 5 Mar which time it has provided a total of

▲
BANKING
BY STEVE DINNEEN
NEW UK lender Aldermore will open
another office to fuel its rapid expan-
sion.
The new facility in Reading will
enable the bank to roll out its opera-
tions providing SMEs with funds to
invest in business assets.
The bank has gone from 24 staff to
300 in its first year of trading, in
£300m of funding to SMEs.
Chief executive Phillip Monks said:
“Our asset finance team is having a
great deal of success and that is part-
ly because SMEs do want to invest in
their businesses.
“We are getting a lot of creditwor-
thy, well resourced companies looking
for financing to grow either because
their banks just can’t lend to SMEs or
they don’t want to lend to SMEs.”

UBS manages
£1bn profit in
tough quarter
remained decent at SwFr1.7bn.
▲

BANKING
BY OLIVER SHAH
SWISS bank UBS said it would resolve
tax haven disclosures with US author-
ities by the autumn as it announced
consensus-beating second quarter
results and slowing outflows yester-
day.
The world’s second largest wealth
manager is due to honour its agree-
ments with the US Department of
Justice and the Securities and
Exchange Commission by October.
UBS hopes the move, which will see it
hand over the details of 4,450 clients,
will draw a line under the affair and
help stem the gush of customers’ sav-
ings from its coffers.
The news came as UBS revealed
robust figures despite a difficult
three months to June. Net profit
came in at SwFr2bn (£1.2bn), down
nine per cent quarter-on-quarter but
above expectations, driven by a
SwFr1.3bn pre-tax gain from invest-
ment banking. In a tough trading
period for peers such as Credit Suisse,
the institution grew its equities rev-
enues by nine per cent to SwFr1.4bn.
Fixed income and commodities
turnover fell 21.3 per cent but
Oswald Grübel, the turnaround
specialist parachuted in as chief exec-
utive last year, particularly trumpeted
the healing in UBS’ troubled wealth
management business. Net outflows
slowed to SwFr5.2bn from SwFr8bn in
the first quarter. Pre-tax profits
slipped marginally to SwFr1.1bn.
Grübel said: “This was a good result
in volatile market conditions and
demonstrates the progress we are
making as we move towards our mid-
term targets.”
Matthias Bueeler at Kepler Capital
Markets hailed the “strong perform-
ance” and said UBS was past the
recovery phase.
But Elie Darwish at Exane BNP
Paribas said the numbers were flat-
tered by a SwFr595m accounting gain
on UBS’ own debt and a SwFr300m
gain on the bank’s derivatives portfo-
lio. “The quality of the results wasn’t
as good as the company’s consensus
beat suggests,” he said.
Another sell-side analyst said UBS
had been reluctant to guide up con-
sensus during the quarter, even when
brokers cut their expectations amid a
raft of disappointing displays from
Wall Street’s behemoths.

CIT’s post-bankruptcy
momentum continues
recoveries from written-off loans
▲

BANKING
BY HARRY BANKS
CIT, the commercial lender that last
year emerged from bankruptcy, yes-
terday reported quarterly profits that
dwarfed analysts’ estimates.
The bank reported a second-quar-
ter profit of $142.1m (£91.3m), or 71
cents a share. Analysts on average
expected a profit of 33 cents a share.
Prior to the bankruptcy and a
financial restructuring, CIT lost
$1.68bn, or $4.30 a share, in the year-
earlier period.
CIT said gains from asset sales and
boosted its second-quarter profit, off-
setting costs it reported related to an
employee retention program and
higher credit costs.
The New York-based company said
it completed the sale of its Australia
and New Zealand vendor business
and it also sold about $580m in stu-
dent lending receivables.
“We improved our funding flexibil-
ity, repaid higher cost debt, stream-
lined our portfolio and largely
completed the build-out of our senior
management team,” said chief execu-
tive John Thain.
 12 News
Northern Rock finance boss
is fined for fudging figures
▲
ENFORCEMENT
BY STEVE DINNEEN
A FORMER Northern Rock finance
director has been fined £320,000 and
banned from working in banking.
David Jones admitted allowing
false mortgage figures to appear in a
document released along with the
firm’s accounts. He allowed the false
reporting to continue for almost a
year in the firm’s trading updates.
The figures masked the extent of
the problems facing the stricken
bank. The correct figures would have
either increased arrears by over 50
per cent or possessions figures by
approximately 300 per cent.
Margaret Cole, FSA director of
enforcement and financial crime,
said: “Even though other senior direc-
tors within the firm were involved in
the misreporting of arrears and pos-
sessions figures, as a senior director
himself and as an FSA authorised per-
son, Jones had a duty to reveal the
true position to the public and to
important internal committees.
“He had numerous opportunities
to put things right, but failed to do so.
“This is a message to all FSA
approved persons, that they must
take their individual responsibilities
seriously at all times, or suffer the
consequences.”
The FSA has fined the bank’s for-
mer deputy chief executive David
Baker £504,000 and former credit
director Richard Barclay £140,000.
David Jones is banned from working in finance
Numis slams
property deal
▲
PROPERTY
BY OLIVER SHAH
NUMIS SECURITIES has turned the
heat up in the £1.6bn merger wrangle
between two of the London market’s
largest property trusts, describing the
tie-up as “not compelling”.
The boards of F&C Property Trust
(FCPT) and UK Commercial Property
Trust (UKCPT) have recommended
joining forces, with the blessing of
their largest shareholders, but minor-
ity investors hold the crucial votes as
the merger is classed as a related par-
ties transaction. The deal would be
structured as a takeover of FCPT by
UKCPT. FCPT shareholders would be
offered a cash exit at 91p, a 1p dis-
count to the share price.
Some minority investors are
unhappy because the arrangement
would incur extra costs and FCPT’s
actively managed approach would be
mashed together with UKCPT’s
Provident Financial is hit
by nervous borrowers
▲
FINANCIAL SERVICES
PROVIDENT Financial said it was not
expecting any change in the economy
for the rest of the year as it missed
expectations for its first-half profit.
However, chief executive Peter
Crook said he was comfortable with
current full-year profit forecasts,
adding the business is set to benefit
from cost-cutting measures and lower
funding costs. He said: “In the second
half of the year, we’re not expecting
any material change. We can’t see any
catalyst for improvement”.
The firm said uncertainty about
the future of the economy was mak-
CITYA.M. 28 JULY 2010
“index-aware” style. The battle is
building to a climax at two extraordi-
nary general meetings on 9 August.
After several analysts voiced nega-
tive views, Numis this week said F&C
Asset Management, which runs FCPT
at arm’s length from the board, had
“put up a well-reasoned defence
against the merger”.
Numis said FCPT’s portfolio, which
consists of 32 properties including
the St Christopher’s Place shopping
centre on Bond Street, was already
well diversified. The stockbroker
added investors would potentially
receive more competitive fees by
sticking with F&C Asset Management.
Numis said in a note: “The argu-
ments in favour of the merger are not
compelling and the key beneficiary is
likely to be Ignis AM [which runs
UKCPT] at the expense of F&C.”
Ignis said yesterday it was confi-
dent the majority of independent
shareholders would vote for the deal.
ing customers nervous about borrow-
ing money. The doorstep lender
reported a pre-tax profit of £54m in
the six months to June.
ANALYSIS l Provident
920 p
821.00
900
27 Jul
880
860
840
820
800
3 May 21 May 10 Jun 30 Jun 20 Jul
CITYA.M. 28 JULY 2010
Halfords dips
as the Budget
takes its toll
RETAIL
▲
BY JOHN DUNNE
HALFORDS posted a fall in first-quar-
ter underlying sales yesterday, with
trade disrupted by May’s general elec-
tion, June’s emergency Budget and
the football World Cup.
”
The group, which runs 462
Halfords stores and the 225-site
Nationwide Autocentres car servicing
business acquired in February, said
yesterday it remained on track to
grow the year to the end of March
2011 pre-tax profit 16 per cent to
about £136m despite the sluggish
quarter. In the three months to June
”
sales dropped by 2.9 per cent.
Halfords has fared better than most
British retailers in the recession as
demand for car parts, maintenance
services and cycles held up and the
firm grew margins and cut costs.
However, chief executive David
Wild said: “The real impact of the gov-
ernment’s spending cuts will be felt
”
more in 2011 than this year and VAT
goes up in January.
PZ Cussons bullish on growth PureCircle figures not so
CONSUMER
▲
BY HARRY BANKS
BRITISH soap and shampoo maker PZ
Cussons beat forecasts with a 20.6 per
cent rise in annual profits yesterday
and said it looked ahead with cau-
tious optimism despite an uncertain
consumer outlook in some markets.
The maker of Imperial Leather and
Carex soaps said it saw profitable
growth in all its key regions of
Europe, Africa and Asia, and trading
since its year end during June and
July had been in line with manage-
“So I think generally the outlook
in terms of consumer confidence is
not that great.”
Prior to yesterday’s update shares
in Halfords had risen by a third over
the last six months, outperforming a
1.1 per cent fall in the UK general
retailers index.
With the World Cup being held in
June the firm decided to delay the
start of its summer leisure promo-
tions until mid-July. Like-for-like sales
at Autocentres were flat over the first-
quarter period, slightly behind inter-
nal forecasts.
ANALYSIS l Halfords
560 p
497.80
27 Jul
540
520
500
480
460
440
14 Dec 6 Jan 26 Jan 15 Feb
ment’s expectations.
The group reported pre-tax profits
of £101.8m for the year to 31 May.
“We look ahead with cautious opti-
mism and an entrepreneurial spirit
despite an uncertain consumer out-
look in a number of markets,” the
group said in an annual results state-
ment yesterday.
House broker Panmure Gordon
described the results as “impressive”
but thinks the shares are due a pause
for breath after rising around 60 per
cent in the past 12 months.
The broker is raising its earnings
Whole Native Lobster & Chips
With A Glass Of J&B NV Champagne
Celebrating Justerini & Brooks 250th Anniversary
Boisdale of Belgravia - Boisdale of Bishopsgate - The Lamb at Hindon
Consumer News 13
New retail
boss hired
for Habitat
▲
RETAIL
Uphill struggle: Halfords is finding the going tough Picture: PA HABITAT has hired Gary Waldron – a
former executive at Fat Face – as its
ANALYST VIEWS: CAN HALFORDS BOUNCE retail director.
The furniture and homeware chain
BACK FROM THESE POOR RESULTS? Interviews by John Dunne is in the middle of a huge shake-up.
The restructuring specialist Hilco
bought Habitat in December from its
NICK BUBB | ARDEN former owner, ICAF, in a deal that
“
involved writing off debts.
Under the agreement there was
The key thing is that Halfords has re-iterated its full-year view of good, also a capital injection of £45m into
mid-teens earnings growth, given good cost control and the benefit of the recent the company. In June, Habitat hired
Nationwide Autocentre acquisition, which continues to integrate well. We there- Phil Wrigley, the former chairman of
fore hold our full-year profit forecast of £136m, a tad ahead of consensus. the fashion retailer New Look.
Meanwhile the company has seen
Mark Saunders, its former chief exec-
MARK PHOTIADES | SINGER CAPITAL MARKETS utive, and Rob Lane, the former head
“
of its UK retail division, leave the
firm.
Trade was disrupted by a number of external factors including the Hilco is also close to unveiling a
Election, the Budget and the World Cup. Poor weather in April also contributed to new chief executive at Habitat,
the sluggish start. we do not expect any change to our own 2011 profit estimate according to industry insiders.
estimate – £136.0m – or consensus £136.4m. The furniture chain, which has 72
shops in Europe, was hit by a loss of
£42m last year.
KEITH BOWMAN | HARGREAVES LANSDOWN But Hilco has vowed that it will
“
break even in the year to 31 May 2011.
Terence Conran founded the com-
The update is disappointing at the margin. Exceptional factors such as pany in London in 1964, opening his
the General Election and the football World Cup appear to have impacted, whilst own store to market his Summa pine
trading at the newly acquired Autocentres has proved below management fore- range of furniture. Habitat listed on
5 Mar casts. Nonetheless, core categories such as cycling continue to deliver. the London Stock Exchange in 1981.
sweet as shares plummet
forecasts for the next two years by
around two per cent to look for
around 11.5 per cent earnings growth
each year. Its 2011 forecast moves to
▲
CONSUMER
16.61p from 16.28p and its 2012 fore- ing costs. PureCircle said it expected
cast to 18.52p from 18.11p. Shares in sweetener maker PureCircle sales for the year to 30 June to be little
Chairman Richard Harvey said plunged 17.3 per cent to 230p yester- changed from the previous year.
Cussons had seen profitable growth day after it warned full-year profitabil- In a separate statement the group
in all three regions of Africa, Asia and ity will be below levels seen in 2009. said it has signed a preliminary deal
Europe. He added: “A clear focus on The group, which supplies sweet- for a joint venture with British Sugar,
the strategy of selected markets, lead- eners to soft drinks giants including part of Associated British Foods. The
ing brands, a world-class supply chain Coca-Cola and Pepsi, said profit has joint venture will be called Natural
and a great team of people has been held back by the fact the group Sweetness with sales and marketing
enabled continued sustainable prof- is running under capacity. Full-year in the venture owned equally by both
itable growth.” 2010 profits have also been hit by ris- parties.
£24.50
Subject to availability until 16th August
15 Eccleston Street, Swedeland Court, Hindon near Salisbury,
London, SW1W 9LX 202 Bishopsgate Wiltshire, SP3 6DP
020 7730 6922 London, EC2M 4NR 01747 820 573
020 7283 1763
www.boisdale.co.uk
 14 Technology and Media News CITYA.M. 28 JULY 2010

ANALYSIS l Broadband speeds compared

Ad sales
Ofcom slams 'up to' 8Mb/s 'up to'
20Mb/s
'up to' 10Mb/s 'up to'
20Mb/s
Paid for

Actual recieved
buoy Daily
broadband 3.8-4.5 6.1-7.6 3.9-4.9 7.0-8.6

'up to' 8Mb/s

Mail firm
speed claims 'up to'
50Mb/s 3.6-4.3

▲
MEDIA
'up to' 20Mb/s
'up to' PUBLISHER Daily Mail & General
'up to' 10Mb/s 24Mb/s Trust (DMGT) said yesterday its flag-
33.4-36.7 ship newspaper business rebounded
TELECOMS tomers to do is leave a contract if 15.2-16.5 strongly after the advertising crisis.
▲

BY STEVE DINNEEN
OFCOM yesterday confirmed what
most people with a broadband con-
nection already know – that you don’t
always get the connection speed you
pay for.
Extensive research by the commu-
nications watchdog revealed that cus-
tomers are often receiving broadband
speeds less than half those being
their speeds are significantly below
that advertised. But whether they will
is another mater: Jeremy says part of
the problem is that UK consumers
have become used to mediocre broad-
band speeds.
“There are things like online games
you can play in Korea that are impos-
sible with broadband speeds in the
UK. But the irony is that their level of
approval of their connections are con-
8.6-9.0 6.5-8.4
Underlying advertising revenues
rebounded 13 per cent at its national
newspaper division, led by the Daily
Mail.
ANALYST VIEWS: WHAT DO OFCOM’S FINDINGS Sales for the third quarter rose six
per cent, also helped by subscriptions
MEAN FOR CONSUMERS? Interviews by Steve Dinneen
to its publications maintaining pace.
Advertising sales at its regional
newspapers – worst hit by the reces-
sion after classified property, recruit-
ED RICHARDS | OFCOM ment and car ads sales dried up – fell

“
advertised. sistently lower than ours. four per cent.
Ofcom yesterday unveiled a new “They have a society where they Ofcom’s research shows that average speeds have increased, which is Total revenues for the third quar-
code of practice aimed at empower- have come to demand exceptional good news. But actual speeds are often much lower than many of the advertised ter to 4 July were £508m, helped by a

ing consumers but analysts told City
A.M. it is unlikely to stop the practice.
Mike Jeremy, an analyst with
Daniel Stewart said it is almost
impossible to pin blame on a
provider. He said: “The problem with
internet connections and we don’t
have that.”
Ofcom’s findings showed average
speeds in the UK are gradually
improving but that the gap in the
advertised rate compared to the actu-
”
speeds which makes it essential that consumers are given information which is as nine per cent underlying increase at
accurate as possible at the point of sale. the company’s business-to-business
operations, which account for almost
half of group sales.
Chief executive Martin Morgan
RICHARD HUNTER | HARGREAVES LANSDOWN said: “Trading in the third quarter

“
advertising a speed which is above al rate is also widening. has continued to reflect the general-
the level of someone’s connection is Ofcom said the big disparities in The fact that Ofcom has identified this is a major step in the right ly positive trends in our internation-
that there are a whole number of speed were often caused by services direction. We saw something similar with roaming charges for mobile phones al B2B and UK consumer media

things that could be slowing it
down.
“It could be your neighbour put-
ting weight on the network, or the
strength of your wireless hub or the
connection into your computer.
being delivered over copper lines
which were simply designed for
phone calls.
Virgin Media outperformed its
rivals, largely due to the massive
investment it has made in its fibre
”
which were later capped. Ofcom’s code of conduct should bring these companies businesses, although we remain
into line and help to penalise ongoing offenders. wary about the medium term out-
look, particularly in the UK”.
DMGT said it would maintain its
focus on cost control, as part of
MIKE JEREMY | DANIEL STEWART which it had closed regional titles

“The process of finding out what is
responsible is complex and expensive.
I very much doubt network providers
“
broadband infrastructure. and slashed jobs.
However, the disparity between Daily Mail’s Euromoney financial
After years of underinvestment the UK has learned to accept medioc-
rural and urban areas is growing as publishing unit last week reported a
rity in its broadband. There are huge regional and local discrepancies in broad-

will be forced to change the way they
advertise.”
What the code will allow cus-
”
cities benefit from new cables that strong fiscal third quarter but said
band speed even amongst the better providers. What we don’t have is any
are logistically difficult and expensive uncertainty remained amid signs of
redress – it’s very difficult to prove whose fault slow connections are.
to supply to the country. weakening advertising sales.

ARM sees 167pc profit spike after

surge in demand for smartphones
TECHNOLOGY As well as smartphones, which Toshiba and Nvidia and receives
▲

BY STEVE DINNEEN
RISING demand for smartphones,
netbooks and tablet computers saw
chip designer ARM Holdings deliver
a remarkable 167 per cent year-on-
year spike in profit.
The British company, whose
designs are in more than 95 per
cent of the world’s mobile phones,
posted record pre-tax profit of
£43.5m on revenue of £100m, both
ahead of expectations.
The results were flattered by a
catch-up royalty payment of $9m
(£5.8m) for shipments of chips
made between 2007 and 2010.
can contain four or five ARM chips
each, the Cambridge-based firm
said its designs were growing
share in consumer electronics and
embedded products, such as
machinery and appliances.
Chief financial officer Tim
Score said new licencing deals
with Freescale, Microsoft and
TSMC would further increase its
market penetration.
He said the group was in “good
shape” on licencing, which
accounted for 24 per cent of
processor design revenue.
ARM licenses its technology to
chipmakers such as Samsung,
royalties of around 6.5p per chip
shipped. Some 1.4bn ARM-
designed chips were shipped in
the prior quarter.
ARM signed a broad “architec-
ture” license agreement with
Microsoft on Friday, which could
lead to the California-based firm
designing its own chip. Apple
developed the A4 chip based on
ARM’s Cortex-A8 core for its
iPhone 4 and iPad tablet comput-
er.
Licencing fees from the multi-
year Microsoft deal will probably
start to be recognised from the
fourth-quarter.

TECHNOLOGY NEWS | IN BRIEF

iPhone users can alter software Foxconn workers taken sick
The US copyright office has given legal
protection for people who unlock
smartphones like Apple's iPhone.
Changing operators’ fixed phone set-
tings – known as “jailbreaking” – has
become widely popular around the
world since the 2007 introduction of
the iPhone. The move by the copyright
office to give exemptions to the Digital
Millennium Copyright Act (DMCA), will
undermine handset makers like Apple’s
ability to control the installation of
software programmes on their phones.
Foxconn International suspended oper-
ations at a mobile phone parts manu-
facturing facility in India after workers
became sick, but it said the incident
would not affect its business. The com-
pany said about 250 workers at its
facility in Tamil Nadu near Chennai
“experienced sensations of giddiness
and nausea” while working in the facil-
ity and were treated at a nearby hospi-
tal. Foxconn said it suspended
operations at the facility as a precau-
tionary measure.
Informa beats forecasts
Business media group Informa said
rebookings for 2011 events were up
nine per cent after a 1.5 per cent fall in
the first half of 2010. Informa’s total
revenues were down 0.5 per cent
organically to £624m in the first half
of the year, after it culled about 500
marginal and less profitable products
and events from its 8,500 strong port-
folio. Adjusted operating profit rose 5.6
per cent to £153m, helped by the
effects of past cost cuts, and both
sales and profits beat market forecasts.
 EX
TE Jul
29
ND y
ED
ALLISTER HEATH IS READY.

DE 01
AD
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2
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ARE YOU?

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leading, free, business daily. Entry to the Awards is free and online. There are 15
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For full details and helpful contact points please visit
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 16 News
Offshore drilling bill diluted
▲
ENERGY
BY HARRY BANKS
US Senate Democrats unveiled a
slimmed down bill yesterday aimed
at reforming offshore drilling, as
doubts grew that Congress would be
able to pass any substantial energy
legislation this year.
The Senate bill, which Democrats
were still refining, would require oil
companies to cover all oil spill costs
by removing the $75m (£48m) cap on
liability relating to economic losses.
The measure would apply retroac-
tively to the 20 April BP oil well disas-
ter in the Gulf of Mexico, which
Luxury auto
firms enjoy
jump in sales
▲
CONSUMER
BY MARION DAKERS
LUXURY car-makers Daimler and
Audi said a surprise jump in demand
will drive profits for the rest of the
year, in separate updates yesterday.
Daimler expects rising sales of its
most expensive Mercedes-Benz mod-
els to push operating profit to €6bn
(£5bn), its best result since the auto
industry boom peaked three years
ago.
The German company said its sec-
ond-quarter cash flow was €2.5bn and
net cash was €9.4bn at the end of the
first half.
It increased its earnings outlook for
the Mercedes unit for the second
time this year, to a target of €4bn
earnings before interest and tax. Just
over half of that figure was achieved
in the six months to June.
“Our strategy is paying off: We have
a very dynamic development of unit
sales and revenue in all divisions.
After what was already a very good
first quarter, we achieved excellent
results in the second quarter,” said
chief executive Dieter Zetsche in a
statement.
Analysts responded positively to
the news. “There were no special
US property price survey
suggests modest growth
▲
US ECONOMY
AMERICAN single-family home prices
rose more than expected in May,
reflecting robust spring sales spurred
by homebuyer tax credits, a home
price survey showed yesterday.
The Standard & Poor’s/Case Shiller
index showed prices in the biggest US
cities had risen 4.6 per cent in May
from the same month last year.
Only Las Vegas registered a month-
ly decline, of 6.5 per cent.
However, the rise follows months
prompted the legislation.
Other provisions in the legislation
would provide rebates for purchasing
vehicles that run on alternative fuels
and making existing homes more
efficient, as well as incentives to pro-
mote electric vehicles.
The estimated $15bn cost of the bill
for clean energy initiatives would be
paid for, according to Democratic
aides, by raising the Oil Spill Liability
Trust Fund fee. While a draft of the
bill said the fee would rise to 49 cents
per barrel of oil, from eight cents, an
aide said that figure was still being
reviewed.
Senate majority leader Harry Reid
items in the results that may have
lowered the earnings quality, and the
industrial free cash flow was much
better than consensus,” said
Commerzbank analyst Sascha
Gommel. “There is nothing in the
results or the outlook that would give
a concrete reason to sell the share.”
Audi’s chief executive said its first-
half results on Friday will be better
than expected. “We are positively sur-
prised by how we’ve started in 2010,”
said Rupert Stadler yesterday. “We
will also have a good second half of
the year.”
The auto industry has recovered
faster than expected in the US, and a
growing number of affluent cus-
tomers in China has further boosted
sales.
ANALYSIS l Daimler
46 €
41.34
27 Jul
42
38
34
3 May 21 May 10 Jun 30 Jun 20 Jul
of lacklustre gains and the survey’s
authors warned that the recovery is
not yet concrete.
“While May’s report on its own
looks somewhat positive, a broader
look at home price levels over the
past year still does not indicate that
the housing market is in any form of
sustained recovery,” said David
Blitzer, chairman of S&P’s index com-
mittee. “Since reaching its recent
trough in April 2009, the housing
market has really only stabilised at
this lower level.”
said he would bring the legislation to
the floor in coming days. But its fate
was uncertain as Reid said he also
wanted to pass at least two other bills
before a month-long recess set to
begin on 6 August.
Meanwhile in the House of
Representatives, Democrats are
preparing to vote on a tough bill on
Friday that would clamp down on off-
shore oil and gas drillers.
In addition to eliminating the oil
spill liability cap, the bill would
impose tough new safety rules and
ban BP from getting new offshore oil
exploration leases for up to seven
years for its role in the Gulf oil spill.
Barclays check out of InterContinental
▲
CONSUMER
SIR David and Sir Frederick Barclay,
the billionaire investors, sold their
entire 10.4 per cent stake in
InterContinental Hotel Group for
£335m yesterday, sending shares in
the world’s biggest hotelier down
sharply.
InterContinental, the owner of the
Holiday Inn and Crowne Plaza
brands, said the twin brothers’ invest-
ment vehicle Ellermann Corp had
sold all of its 29.9m shares.
Sir David and Sir Frederick, owners
of the Daily Telegraph, Littlewoods
NEWS | IN BRIEF
SAP disappoints with upgrade
SAP, the world’s biggest maker of busi-
ness software, raised its 2010 sales fore-
cast by less than the market had hoped
yesterday given a rebound in global tech-
nology spending. The German company
raised its 2010 growth forecast for non-
IFRS key software and software-related
service revenue (SSRS) to a range of 9-11
per cent from the previous 4-8 per cent.
That includes contributions from US
database company Sybase, which SAP
acquired in May, of 6-8 percentage
points. It stuck to its full-year target for a
non-IFRS operating margin of 30-31 per
cent. SAP – whose more than 100,000
customers include McDonald’s and
Apple – bills itself as the world's leading
provider of software to help manage sup-
ply chains and customer relations.
Kryso to announce £130m
deal with Chinese group
▲
MINING
KRYSO RESOURCES, the Aim-listed
gold explorer, is this morning expect-
ed to announce a tie-up with China
Nonferrous Metals International
Mining (CNMIM) worth £130m.
CNMIM will take a 29.9 per cent
stake in Kryso for £10.9m through a
conditional placing to help the com-
pany develop its Pakrut gold project
in Tajikistan. CNMIM will give an
additional undertaking to raise
£120m for equipment and working
and the London Ritz hotel, started
buying shares in the group toward
the end of 2006, paying between
around £9.50 and £13 per share while
they accumulated their stake.
They built their holding to around
10 per cent by May 2007 to become
the biggest shareholders, and it was
thought for a while that they might
mount a takeover bid.
Barclays Capital was the sole
bookrunner for placing the 29.9m
shares the brothers held at £11.20
each, the lower end of the broker’s
revised range, according to traders.
In recent weeks InterContinental,
Banco Popular’s profits plunge
Spanish bank Popular’s first-half profit
fell by a fifth due to the continued slow-
down in its core bank business and lower
one-time gains, it revealed yesterday.
Bad loans as a percentage of the total
loan book rose to 5.04 per cent at the
end of June from 4.91 per cent at the end
of March, while total provisions against
bad loans declined 13.9 per cent from a
year earlier due to a 63.2 per cent fall in
new bad loan adds. Popular said it
expects new bad loans – and consequent-
ly the amount it will need to set aside for
provisions – to continue to decline over
the coming quarters. First-half net profit
fell to €354.6m (£295.7m), missing fore-
casts for €358.4m in a Reuters poll of
banks and brokers. Interest revenue fell
9.3 per cent to €1.29bn in the first half.
CITYA.M. 28 JULY 2010
capital to help Kryso extract the pre-
cious metal. There are an estimated
2.8m ounces of gold at the Pakrut site
worth around $4bn (£2.6bn).
Kryso has been in talks with
CNMIM, which is part-owned by the
Chinese government, for three
months. Yesterday representatives
from the company met the Chinese
and Tajik ambassadors at the offices
of law firm Speechly Bircham to seal
the deal. It is still dependent on due
diligence and ratification by Kyrso’s
shareholders at an EGM.
Sir David and Sir
Frederick Barclay
were the biggest
shareholders in
InterContinental
Hotel
Picture: GETTY
which owns the Holiday Inn and
Crowne Plaza brands, has been lifted
by a successful investor roadshow,
and by positive comments on current
trading by rivals such as Starwood. Its
share price has jumped 34 per cent
since January, and 88 per cent in the
past year.
InterContinental’s house brokers
are JP Morgan and Bank of America,
which were not involved in the trans-
action. Barclays Capital declined to
comment on the placing yesterday.
Shares in InterContinental closed
7.4 per cent down yesterday at £11.10,
its steepest drop since June 2007.
Danone cautious on Europe
French food group Danone said yesterday
that its operating margin would stay flat
this year as the economic crisis continues
to hurt consumer demand in Europe.
The world’s largest yoghurt maker also
said the cost of milk would rise 10 per
cent this year, more than the five to
seven per cent it had previously expected,
and that it was likely to continue to
raise prices in some markets. First-half
operating profit rose two per cent to
€1.28bn. First-half sales rose seven per
cent on a like-for-like basis to
€8.36bn, with growth in Asia and the
rest of the world outpacing 1.7 per cent
growth in Europe. Danone raised its goal
for 2010 like-for-like sales growth
to at least six per cent from an earlier
target of at least five per cent.
CITYA.M. 28 JULY 2010
DuPont raises 2010 forecast
▲
INDUSTRIAL
BY HARRY BANKS
CHEMICAL maker DuPont forecast
2010 earnings well above expecta-
tions yesterday, boosting its shares, as
the rebounding global economy con-
tinued to fuel the firm’s recovery.
The third-largest US chemical
maker said its second-quarter profit
nearly tripled, offering a positive read
on global economic health as many
companies have been reporting bet-
ter-than-expected quarterly profits.
“This is as good a quarter as I’ve
seen DuPont report in a long time,”
said Deutsche Bank analyst David
Nasdaq OMX
profits soar in
surprise jump
▲
FINANCIAL SERVICES
BY HARRY BANKS
NASDAQ Group posted a profit rise of
nearly 40 per cent yesterday on the
back of a sharp jump in stock and
option trading, beating expectations.
Transaction revenues rose a sur-
prising 20 per cent from a year ago,
reflecting the volatility and volumes
brought on by the May “flash crash”
and overall concern over Europe’s
debt woes.
In the second quarter, the trans-
Atlantic market operator earned
$96m (£62m), or 46 cents per share,
up from $69m, or 33 cents a share, a
year ago.
Adjusted earnings were 52 cents a
share, compared with the analysts’
estimates of 49 cents a share, Revenue
was up 6.3 per cent at $390m.
Nasdaq OMX, which also runs
exchanges in Northern Europe, has
mostly stabilised its share of the US
stock market and reached a record
share in options, at more than 20 per
cent apiece.
The company’s growth partly
hinges on its ability to clear interest
rate swaps, capitalising on the global
regulatory push to run derivatives
through clearinghouses such as
CITY MOVES | WHO’S SWITCHING JOBS
Ernst & Young
The accountancy firm has appointed Jonathan
Summers to its information technology adviso-
ry team as a director focusing on strategic
rationalisation, the process of removing tech-
nology complexity to improve business per-
formance.
Summer has over 14 years of experience
with IBM, where his roles included establishing
a global delivery capability for data migration
in India.
Jefferies
The banking group has expanded its
global mergers and acquisitions invest-
To appear in CITYMOVES please email your career
updates and pictures to citymoves@cityam.com
Begleiter. “The fact that they’re rais-
ing guidance ... and noting some
signs of recovery, is evidence that
there hasn’t been a marked slow-
down of macroeconomic activity yet.”
DuPont said the new 2010 profit
forecast reflects its confidence after
the second-quarter results.
It now expects 2010 earnings of
$2.90 (£1.86) to $3.05 per share,
excluding one-time items, up from a
previous forecast of $2.50 to $2.70 per
share. Analysts expect 2010 earnings
of $2.64.
Chief executive Ellen Kullman said
she expects the economic recovery to
be “more moderate” in the second
Nasdaq OMX’s nascent, majority-
owned International Derivatives
Clearing Group (IDCG).
“We have committed players who
are putting real open interest into the
clearing house,” chief executive
Robert Greifeld said of the clearer.
“We’ve had several trades, and we
expect several more this week.”
IDCG cleared 60 contracts this
month, according to its website.
The chief executive added that
since US President Barack Obama
signed the Wall Street reform bill last
week, talks “increased dramatically”
with swaps dealers and others. He
suggested the product offering will
be adjusted at IDCG, which was
expected to launch this quarter, and
will face competition from CME
Group and London-based LCH.
Clearnet.“They’re in the running and
in a good position to clear interest
rate swaps, but there could be multi-
ple players,” said Sandler O’Neill ana-
lyst Rich Repetto.
The company’s shares are still off
more than 13 per cent from an April
high, as fears of a double-dip slump
hit markets. The dip allowed Nasdaq
OMX to buy back $200m worth of
shares; it now plans to repurchase
$400m in total.
ment banking team with the appoint-
ment of Tariq Hussain as a managing
director in London.
SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT
half of 2010.
“We continue to hit our productiv-
ity and cost-control targets, and
remain highly disciplined in creating
operating leverage to further grow
the company,” Kullman said.
Sales in emerging markets jumped
33 per cent, with Asia alone up 47 per
cent. The United States and Europe,
which have lagged amid the econom-
ic recovery for DuPont, saw sales
increase 18 per cent and 24 per cent,
respectively.
The agricultural and nutrition
unit, which sells hybrid seeds under
the Pioneer brand, saw sales jump 16
per cent to $3bn.
BEST OF THE BROKERS
ANALYSIS l National Grid
580 p
515.00
560
27 Jul
540
520
500
480
460
19 May 9 Jun 29 Jun 19 Jul
NATIONAL GRID
Standard & Poor’s Equity Research (S&P)
believes National Grid has delivered a
strong operational and financial perform-
ance and gives it a “hold” rating. S&P said
in the first quarter of 2011, US gas distri-
bution volumes increased by 1.5 per cent
and electricity was up 1.3 per cent, but UK
gas volumes fell by 4.6 per cent.
Continental staff primed for top jobs in
merger as UAL executives take flight
▲
AVIATION
UAL and Continental Airlines, which
plan to merge this year to create the
world’s largest airline, announced a
new management lineup yesterday
that puts Continental executives in
choice spots.
UAL, parent of United Airlines, and
Continental, said they have proposed
naming Continental chief financial
Edited by Victoria Bates
Hussain has 14 years of investment
banking experience, 12 of which were
spent at Dresdner Kleinwort, where he
held roles such as co-head of European
M&A and global head of the financial
buyers group.
Olivetree Securities
The equities intermediary brokerage
firm has appointed James
Netherthorpe as chief operating officer
and head of distribution.
Netherthorpe joins the firm in
October from hedge fund manager
Marshall Wace, where he was a partner
responsible for developing the group’s
Canon boosted as camera
and printer demand rises
▲
CONSUMER
JAPANESE camera and office equip-
ment maker Canon yesterday posted
a 153 per cent rise in quarterly profit,
a bigger than expected climb on
robust sales of its high-end cameras.
For the year to 31 December the
maker of IXY compact cameras and
upmarket EOS cameras kept its oper-
ating profit outlook at 360bn yen
(£2.6bn), compared with a consensus
forecast of 384bn yen in a poll of
seven analysts.
ANALYSIS l Pearson
1,100 p
1,022.00
27 Jul
1,050
1,000
950
900
850
19 May 9 Jun 29 Jun 19 Jul
PEARSON
JP Morgan Cazenove has given Pearson a
“neutral” rating but said that the group
delivered reassuring half year results. JP
Morgan said that all divisions delivered
underlying revenue and profit growth in
the first half of 2010. But JP Morgan
remain slightly cautious about growth in
2011 due to government spending cuts.
To appear in Best of the Brokers email your research to notes@cityam.com
officer Zane Rowe as chief financial
officer of the combined company.
UAL chief administrative officer
Pete McDonald would be chief opera-
tions officer. Continental chief mar-
keting officer Jim Compton would
keep that job title at the new compa-
ny. Continental chief executive Jeff
Smisek is slated to run the merged
company.
]The two airlines also yesterday
in association with
trading capabilities. Prior to that, he
spent five years in pan-European equity
sales trading at Goldman Sachs.
Bestinvest
The investment manager has appointed
Donald Reid as chief operating officer.
Reid was formerly head of operations
at UBS Wealth Management and oper-
ations director and finance director at
Barclays Stockbrokers and Barclays
Wealth Management.
USS
The Universities Superannuation
Scheme has appointed Michael Dymond
News 17
Operating profit for April to June
was 113.4bn yen, compared with a
forecast of 90.6bn yen.
It marked the third straight quar-
ter of year-on-year profit growth for
the world’s biggest maker of digital
cameras, ahead of Sony and Nikon.
Shares in Canon, which also com-
petes with Xerox and Ricoh in office
equipment, fell 19.2 per cent from
April to Monday, underperforming
Tokyo’s electrical machinery index
IELEC.T, which fell 16.8 per cent in the
same period.
ANALYSIS l Unilever
580 p 1,868.00
27 Jul
560
540
520
500
480
460
19 May 9 Jun 29 Jun 19 Jul
UNILEVER
In the first quarter Unilever benefited from
benign raw materials, according to
Citigroup and hence reinvested the benefit
into pricing, which drove volumes. Citi has
given Unilever a “buy” rating and said that
the operating leverage delivered strong
margin progression. Citi expects a similar
result in the second quarter.
announced the departure of two top
UAL executives: president John Tague
and chief financial officer Kathryn
Mikells. “The Mikells change surprised
me quite a bit just given the remark-
able job that she’s done at United over
the last couple of years and dealing
with some very difficult liquidity
issues,” said airline researcher William
Swelbar, of Massachusetts Institute of
Technology.
as a portfolio manager for private capi-
tal funds.
Dymond will focus on the selection of
private equity funds and report to head
of alternative assets Mike Powell. He
previously worked as a senior associate
within the private equity fund of funds
team at Pinebridge Investments.
Deloitte
The business advisory firm has expand-
ed its pensions practice with the hire of
two senior partners from PwC.
Richard Slater and Mark McClintock
join from PwC’s Edinburgh and Belfast
offices respectively.
+44 (0)20 7557 7245
morganmckinley.com
 City Focus
18 CITYA.M. 28 JULY 2010

| Law

Indemnity market must be liberalised

Reforms will prevent a repeat of this year’s
disastrous round, writes Jeremy Hazlehurst

T
HIS year’s round of Professional
Indemnity Insurance (PII) renewals
promises to be one of the most tur-
bulent ever, but it could spur
much-needed changes to the way the sys-
tem is run. All law firms in England and
Wales have to renew their PII by 1
October, but last week insurer Zurich,
which insured 13 per cent of law firms in
England and Wales in 2009/10, said it
will reduce its participation in the mar-
ket. This follows Catlin and Hiscox
pulling out of it altogether. In March,
Quinn, the insurer of about 3,000 of
England and Wales’ 11,000 law firms,
went into administration.
Martin Ellis from Prime Professions, an
insurance broker that looks after a round
a quarter of the law firms in England and
Wales, estimates that up to 800 firms
could find themselves without insurance.
These firms will then be insured by the
Assigned Risks Pool (ARP), an option of
last resort, where all active Qualifying
Insurers cover a proportion relative to the
total premium written. The ARP was
designed to help distressed firms unable
to obtain insurance from commercial
insurers. The figure as of February 2010
was 241. Absurdly, this October the ARP
could become one of the main insurers
for law firms.
This is not just bad for firms who will
find themselves in the ARP but the whole
industry, because the ARP’s costs are
borne by other law firms. Martin Ellis
estimates that the pot of premium will
go up from £246m at present to nearer
£300m. This is very unwelcome. In
2009/10, 21 per cent of firms already had
problems in renewing their PII, and 62
per cent said premiums rose. The median
PII went up by 33 per cent, says the Law
Society. PII is already the third-biggest
cost for law firms after rent and salaries
and the estimated 20 per cent increase in
premiums could well force smaller firms
out of business.
Why has this happened? Partly because
insurers are worried about residential
and commercial property deals done
before 2008 leading to claims against
solicitors. But the problem is deeper. The
PII market is dysfunctional and the ARP
doesn’t work. Firms in the ARP have to
pay a punitive 27.5 per cent of their gross
income in premiums, but as at 14 June,
out of £6.5m of ARP premium due for the
2008/9 indemnity year, only £2m had
been paid. Even pre-2008, only 6 per cent
of firms that entered ARP would emerge
in good shape.
What is the solution? One school of
thought says that the ARP should be
closed down. After all, if a firm can’t find
an insurer on the open market, does it
deserve to survive? The ARP is expensive,
doesn’t work, and creates moral hazard –
the existence of a safety net encourages
risk-taking. But it would be unjust that
small firms that have been around for 40
years without a claim go out of business
through insurers’ risk-aversion. And as
Des Hudson, chief executive of the Law
Society, points out, the ARP protects con-
sumers from reckless firms. Plus, losing
small firms would reduce consumer
choice.
The PII system needs reform, and two
basic things need to happen. Firstly, the
ARP regime should be more punitive. The
Solicitors Regulation Authority (SRA),
which runs the PII system, has already
started to make it so, by reducing the
time a firm can spend in it from 24 to 12
months. And it said last week that firms will become more widespread. Some Does the safety all parties to manage risk”.
which have not paid their premiums by 1 insurers discount 30 per cent on premi- net work? A decade ago the legal profession
October will be shut down. This needs to ums for those with good risk-manage- moved away from the industry funding
go further, to reduce moral hazard. ment. The PII market should be used to Picture: GETTY the ARP itself, to the current market sys-
Secondly, the SRA must free up the encourage this trend. A better market tem. It now has to go further. True, some
insurance market. Currently, Qualifying would attract insurers, increase competi- of this year’s problems are caused by
Insurers’ (QI) policies have to meet mini- tion and reduce costs for law firms and insurers pressurising the industry. But
mum terms and conditions (MTC), but consumers. they are right to try to force change.
these are inflexible and prevent insurers Belatedly, the SRA is coming round to Solicitors will have to grit their teeth and
from offering firms bespoke insurance this way of thinking. It is carrying out a pay up this October, but it is vital that
products. Loosening the MTC would allow review of the PII system and its executive when the SRA’s review comes out in
QIs to better reward good, innovative risk- director of corporate regulation Spring it introduces a more flexible, mar-
management with lower premiums. The Samantha Barrass recently suggested that ket-based PII system – and one that is in
industry is fast becoming more risk man- it will bring in a more open market. She place for next year’s round. If not, it will
agement-aware: with the onset of out- said that the current system “introduces face questions from the City law firms
come-focused regulation next year distortions” into the insurance market, which are funding a bankrupt system
dedicated risk-management departments and “generally reduces the incentives for jeremy.hazlehurst@cityam.com

Changes in extradition
dence submitted. In practice this means
the UK must set out the facts and circum-
stances sufficient to warrant a prudent
person to believe a suspect has committed
a crime. In stark contrast the US need only
UK at the time of the alleged misconduct
and he should thus not be extradited.
Gary McKinnon, the computer hacker, is
another who faces extradition and whose
plight has exposed perceived unfairness in

regime are a pipe dream

British decision; allegedly on the back of
lobbying from none other than BP.
What this clearly demonstrated was the
lack of inhibition on the part of the US
when it came to dealing with its junior
partner the UK. By contrast the UK
responds with meek diplomacy and over-
tures in the hope of appeasement.
One area that demonstrates the gulf in
DAN HYDE equality is extradition. The extradition
CUBISM LAW arrangements between the UK and US are
not reciprocal but one sided in a critical
show a reasonable suspicion that the
intended subject committed a crime by
presenting an “information only request”.
Any lawyer worth their salt recognises the
test is far lower for the US and skews the
arrangement firmly in the US’s favour.
One reason for the US’s refusal to recip-
rocate is that its constitution prevents it
from extraditing a US citizen on the word
of another government and without there
being a reasonable basis to believe the per-
son committed the offence. US citizens are
thus guaranteed a level of protection that
the UK does not afford and the UK has
entered into an arrangement where there
was never going to be reciprocity.
Further, while the purported intent was
to deport terrorism suspects harboured
abroad the cases and statistics reveal it has
the arrangements. Far from focussing on
terrorism the US is able to pluck whosoev-
er it targets with relative ease.
We are now told by Theresa May that
the coalition government is committed to
reviewing the arrangements. Whether
this will result in positive change is far
from certain. Any objective review would
conclude that there is neither parity or
fairness and that safeguards should be
implemented to afford UK citizens a simi-
lar level of protection to their US counter-
parts. Another possibility would be to
ensure the very high costs incurred as a
result of an extradition be met by the
country initiating the extradition.
The fear is that the special relationship
prevails such that the UK responds with
meek diplomacy and overtures to its sen-

O
UR special relationship with the US
has, of late, appeared rather
strained. The noises from across the
pond have been somewhat anti-
British and not it seems influenced or
restrained by any relationship, special or
otherwise. The BP oil spill suddenly
became the British Petroleum spill and
the release of the Lockerbie bomber a
respect. The Extradition Act 2003 allows
extradition from the UK to a country with
which there is no reciprocity with the
result that the UK must show “probable
cause” for a prosecution when seeking
extradition from the US. This is very close
to requiring a demonstration of a prima
facie case – ie that there is a case for the
suspect to answer on the face of the evi-
instead been aimed at suspected white-col-
lar criminals, a significant proportion of
whom were British citizens. The Nat West
Three and Ian Norris, former chief execu-
tive of Morgan Crucible, demonstrate the
point. Ian Norris was ultimately able to
successfully appeal his extradition
because the House of Lords held that the
alleged price fixing was not a crime in the
ior partner, the US. And the likely
response of the US? It should come as no
surprise that the current arrangements
are lauded by the US Embassy which sees
no imbalance or need for change. It is gen-
erally those at the bottom of the slope
who seek to level the field, not those at
the top – and the US clearly intends to
remain on top.
 Markets&Investment 19

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Company Name Closing Price Price Change 52wk High 52wk low Company Name Closing Price Price Change 52wk High 52wk low Company Name Closing Price Price Change 52wk High 52wk low Company Name Closing Price Price Change 52wk High 52wk low
(p) (p) (p) (p) (p) (p) (p) (p) (p) (p) (p) (p) (p) (p) (p) (p)
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3i Infrastructure . . . . . . . . . . . . . 111.30 –0.70 115.00 89.35 Compass . . . . . . . . . . . . . . . . . .558.00* –8.50 574.50 307.75 ITV . . . . . . . . . . . . . . . . . . . . . . . .54.20 –1.15 71.75 36.50 Schroders . . . . . . . . . . . . . . . . .1275.00 +29.00 1450.00 899.00
A.B. Foods . . . . . . . . . . . . . . . .1091.00 +5.00 1092.00 768.50 Cookson . . . . . . . . . . . . . . . . . . .460.20 –5.30 616.00 292.50 Jardine Lloyd Thompson. . . . . . .590.50 –7.50 604.50 420.70 Schroders N/V. . . . . . . . . . . . . .1055.00 +16.00 1185.00 779.00
Aberdeen Asset Man . . . . . . . . . .138.00 +3.10 155.60 111.00 Croda Intl . . . . . . . . . . . . . . . . .1272.00 +99.00 1274.00 536.00 Johnson Matthey . . . . . . . . . . .1723.00* +20.00 1814.00 1302.00 Scot. & Sthrn Energy. . . . . . . . . 1178.00 +10.00 1206.00 357.50
Admiral. . . . . . . . . . . . . . . . . . .1499.00 –7.00 1519.00 921.00 CSR . . . . . . . . . . . . . . . . . . . . . .414.70 +3.70 524.00 338.75 Kazakhmys . . . . . . . . . . . . . . . .1216.00 +13.00 1634.00 768.00 Scottish Mortgage. . . . . . . . . . . .610.00 — 623.50 420.75
Aegis . . . . . . . . . . . . . . . . . . . . . 118.20 –0.20 137.30 81.50 Daily Mail ‘A’ . . . . . . . . . . . . . . . .486.50 –11.90 539.00 290.00 Kesa Electricals . . . . . . . . . . . . .130.40 –0.60 162.00 98.45
Afren . . . . . . . . . . . . . . . . . . . . . .92.95 +0.20 111.00 51.75 Dana Petroleum . . . . . . . . . . . .1707.00 +17.00 1728.00 968.50 .LQJÀVKHU . . . . . . . . . . . . . . . . . .221.50 –0.30 255.00 196.50 SEGRO . . . . . . . . . . . . . . . . . . . .287.10 +4.30 403.10 244.00
African Barr Gold . . . . . . . . . . . .547.00 –3.00 685.00 520.50 Davis Service . . . . . . . . . . . . . . .385.50 –6.30 442.30 323.25 Ladbrokes . . . . . . . . . . . . . . . . .138.30 –0.70 174.29 114.60 Serco . . . . . . . . . . . . . . . . . . . . .558.50 –10.50 656.50 394.30
Aggreko . . . . . . . . . . . . . . . . . .1543.00 –59.00 1639.00 524.50 De La Rue . . . . . . . . . . . . . . . . . .759.00* +2.50 1021.00 744.00 Lancashire Hldgs . . . . . . . . . . . .541.50 +2.50 545.00 416.70 Severn Trent . . . . . . . . . . . . . . .1285.00* +2.00 1310.00 921.00
Alliance Trust . . . . . . . . . . . . . . .322.20* +0.80 352.70 281.00 Debenhams . . . . . . . . . . . . . . . . .65.40 +0.40 91.95 51.95 Land Securities . . . . . . . . . . . . . .626.00* +10.00 743.50 487.00 Shaftesbury . . . . . . . . . . . . . . . .406.00 +2.40 426.50 307.75
AMEC . . . . . . . . . . . . . . . . . . . . .898.00 –1.00 909.50 684.50 Derwent London . . . . . . . . . . . .1355.00 +6.00 1490.00 906.00 Legal & General . . . . . . . . . . . . . .92.10 –0.35 94.70 57.00 Shire. . . . . . . . . . . . . . . . . . . . .1467.00 –8.00 1526.00 850.00
Amlin . . . . . . . . . . . . . . . . . . . . .423.70 –4.40 432.20 320.25 Dexion Absolute . . . . . . . . . . . . .139.40 –0.30 148.00 117.00 Lloyds Banking Gp . . . . . . . . . . . .71.80 +5.80 75.58 45.30 Smith & Nephew . . . . . . . . . . . . .551.00 +5.00 700.50 458.60
Anglo American . . . . . . . . . . . .2534.50 –4.50 3015.50 1777.50 Diageo . . . . . . . . . . . . . . . . . . . 1137.00 –6.00 1176.00 893.00 Logica . . . . . . . . . . . . . . . . . . . .102.40 –1.20 149.10 84.25 Smith(Ds) . . . . . . . . . . . . . . . . . .144.30 –2.90 150.20 70.00
Antofagasta . . . . . . . . . . . . . . .1005.00 –9.00 1100.00 676.00 Dimension Data . . . . . . . . . . . . .124.00 –0.30 125.50 55.00 London Stk Exchange . . . . . . . . .659.50* +31.00 949.50 540.50 Smiths . . . . . . . . . . . . . . . . . . . 1135.00 –12.00 1186.00 715.00
Aquarius Platinum . . . . . . . . . . .278.00 –1.00 490.00 211.50 Domino’s Pizza . . . . . . . . . . . . . .418.20* –6.70 431.30 228.40 Lonmin . . . . . . . . . . . . . . . . . . .1549.00 +8.00 2198.00 1214.00 SOCO Intl . . . . . . . . . . . . . . . . . .425.10 –3.10 444.60 380.60
ARM Holdings . . . . . . . . . . . . . . .333.90 –12.20 370.00 120.50 Drax . . . . . . . . . . . . . . . . . . . . . .385.60 +8.90 496.50 321.50 Man . . . . . . . . . . . . . . . . . . . . . .225.50 +0.90 373.60 199.60 Spectris . . . . . . . . . . . . . . . . . . .888.50 –9.00 949.00 545.00
Arriva . . . . . . . . . . . . . . . . . . . . .770.00 –1.00 782.50 413.50 DSG Intl . . . . . . . . . . . . . . . . . . . .28.20 +0.58 39.75 23.00 Marks & Spencer. . . . . . . . . . . . .349.60 –4.60 412.70 321.90 Spirax-Sarco Eng . . . . . . . . . . .1578.00 –11.00 1617.00 893.50
Ashmore . . . . . . . . . . . . . . . . . . .284.80 –1.80 311.20 195.00 Dunelm . . . . . . . . . . . . . . . . . . . .392.20 –7.10 438.40 250.70 Meggitt . . . . . . . . . . . . . . . . . . . .312.90 –7.60 331.00 168.50
Astrazeneca . . . . . . . . . . . . . . .3189.00 +63.00 3277.50 2668.00 Easyjet . . . . . . . . . . . . . . . . . . . .434.50 +4.90 499.90 271.00 Melrose . . . . . . . . . . . . . . . . . . .236.00 +0.60 251.50 110.50 Spirent Comms . . . . . . . . . . . . . .130.00 –4.60 135.90 64.50
Atkins(Ws) . . . . . . . . . . . . . . . . .751.50 –0.50 760.50 532.50 Edinburgh Inv Tst . . . . . . . . . . . .399.10* –0.50 412.40 313.50 Mercantile IT . . . . . . . . . . . . . . . .958.50* –1.50 1002.00 772.00 Sports Direct Intl . . . . . . . . . . . . . 113.10 –2.10 134.00 81.80
Autonomy Corp . . . . . . . . . . . .1678.00 +48.00 2012.00 1161.00 Electrocomponents . . . . . . . . . . .226.40 –0.60 245.00 142.25 Michael Page Intl. . . . . . . . . . . . .397.80 –6.20 461.50 272.50 SSL Intl . . . . . . . . . . . . . . . . . . . 1181.00 –3.00 1190.00 522.50
Aveva . . . . . . . . . . . . . . . . . . . .1353.00* –2.00 1368.00 755.00 EnQuest . . . . . . . . . . . . . . . . . . . 110.00 +3.50 112.70 87.35 Micro Focus . . . . . . . . . . . . . . . .424.50 +4.70 550.00 300.90 St James’s Place . . . . . . . . . . . . .256.40 +5.60 296.90 172.25
Aviva . . . . . . . . . . . . . . . . . . . . .363.50 +8.40 474.00 290.20 Essar Energy . . . . . . . . . . . . . . .439.70 –5.00 475.90 358.50 Millen & Copthorne . . . . . . . . . . .487.30 –9.70 504.00 246.50 Stagecoach. . . . . . . . . . . . . . . . .183.80 +1.90 204.90 126.20
Babcock International . . . . . . . . .567.00 –30.00 660.50 459.80 Eurasian Nat Res . . . . . . . . . . . .918.00 –3.00 1276.00 731.00 Misys . . . . . . . . . . . . . . . . . . . . .257.70 +7.50 281.70 171.00 Standard Chartered . . . . . . . . . .1899.00 +49.00 1910.50 1310.00
BAE Systems . . . . . . . . . . . . . . .318.60 +1.70 389.90 294.20 Euromoney Inst Inv . . . . . . . . . . .586.00 –7.00 630.00 220.00 Mitchells & Butlers . . . . . . . . . . .316.10 –4.80 343.90 228.30 Standard Life . . . . . . . . . . . . . . .204.00 +5.00 237.00 170.00
Balfour Beatty . . . . . . . . . . . . . . .255.80 –2.30 328.85 228.60 Experian . . . . . . . . . . . . . . . . . . .637.00 –10.00 664.50 471.25 MITIE . . . . . . . . . . . . . . . . . . . . .209.80* +0.70 281.70 195.20 SuperGrp . . . . . . . . . . . . . . . . . .950.00 –2.00 1030.00 499.00
Barclays . . . . . . . . . . . . . . . . . . .339.55 +23.90 394.25 253.40 F&C Comm Prop . . . . . . . . . . . . . .91.80* –0.65 96.80 74.50 Mondi . . . . . . . . . . . . . . . . . . . . .450.00 –0.40 488.00 238.75 TalkTalk . . . . . . . . . . . . . . . . . . .123.00 — 147.10 106.60
Barratt Development . . . . . . . . . .101.30 +1.00 193.31 89.10 Ferrexpo . . . . . . . . . . . . . . . . . . .293.10 +0.80 396.20 138.00 Monks Inv Tst . . . . . . . . . . . . . . .295.00* — 321.20 238.00 Talvivaara Mining . . . . . . . . . . . .413.20 +0.90 501.50 341.40
BBA Aviation . . . . . . . . . . . . . . .195.60 +0.40 220.00 123.50 FirstGroup . . . . . . . . . . . . . . . . .379.60* –1.10 448.80 322.75 Morrison Wm . . . . . . . . . . . . . . .270.20 –7.20 306.30 255.00 Tate & Lyle . . . . . . . . . . . . . . . . .462.30* –6.40 509.00 336.00
Beazley. . . . . . . . . . . . . . . . . . . .120.50 –1.80 125.80 95.25 Foreign & Col Inv Tst. . . . . . . . . .276.90 –2.70 297.20 229.50 Murray Intl Tst . . . . . . . . . . . . . . .841.00* –6.00 893.50 632.00 Taylor Wimpey . . . . . . . . . . . . . . .27.50 +0.28 54.90 24.29
Bellway. . . . . . . . . . . . . . . . . . . .583.00 –0.50 927.50 554.00 Fresnillo . . . . . . . . . . . . . . . . . .1040.00 –23.00 1139.00 539.50 National Express. . . . . . . . . . . . .245.60 –2.60 258.60 155.86
Berkeley . . . . . . . . . . . . . . . . . . .827.50 –6.50 989.50 735.00 G4S . . . . . . . . . . . . . . . . . . . . . .265.10 –0.70 285.70 208.50 National Grid . . . . . . . . . . . . . . .515.00* +6.00 607.65 474.80 Telecity . . . . . . . . . . . . . . . . . . . .437.00 –3.10 458.90 300.00
BG . . . . . . . . . . . . . . . . . . . . . .1063.00 –3.00 1248.00 966.90 Genesis Emerging Mkts Fd . . . . .473.40 –3.60 484.00 370.00 Next . . . . . . . . . . . . . . . . . . . . .2180.00 –22.00 2360.00 1601.00 Templeton Emrg Mkts . . . . . . . . .557.00* — 598.00 390.00
BHP Billiton . . . . . . . . . . . . . . .1968.50 — 2346.00 1481.00 GKN . . . . . . . . . . . . . . . . . . . . . .141.20 –3.20 155.00 90.00 Northumbrian Water . . . . . . . . . .329.20 +3.90 331.30 219.90 Tesco . . . . . . . . . . . . . . . . . . . . .396.35 +0.95 454.90 361.20
BlackRock Mining . . . . . . . . . . . .572.00 –4.00 654.50 412.00 GlaxoSmithKline . . . . . . . . . . . . 1155.00 –17.00 1347.00 1088.00 Old Mutual . . . . . . . . . . . . . . . . .124.30 +2.20 127.20 85.80 Thomas Cook . . . . . . . . . . . . . . .193.30 +2.10 277.20 172.30
Booker . . . . . . . . . . . . . . . . . . . . .44.76 +0.15 49.50 33.00 Great Portland Estates . . . . . . . .306.90 +0.70 332.10 219.00 Pace . . . . . . . . . . . . . . . . . . . . . .210.50 –3.50 243.80 145.00 Tomkins . . . . . . . . . . . . . . . . . . .324.00 +16.50 325.50 155.00
BP . . . . . . . . . . . . . . . . . . . . . . .406.00 –10.95 658.20 296.00 Greene King . . . . . . . . . . . . . . . .446.20 –2.90 504.00 372.50 Partygaming . . . . . . . . . . . . . . . .253.90 +4.90 339.70 205.80 Travis Perkins . . . . . . . . . . . . . . .830.00 –6.50 915.00 647.50
Brit Insurance . . . . . . . . . . . . . . .913.50 –7.00 975.00 709.00 Halfords . . . . . . . . . . . . . . . . . . .497.80* –18.70 562.50 324.00 Pearson . . . . . . . . . . . . . . . . . .1022.00 –7.00 1069.00 642.00 TUI Travel . . . . . . . . . . . . . . . . . .218.50 –2.80 313.90 202.30
British Airways . . . . . . . . . . . . . .224.50 +0.90 255.80 127.50 Halma . . . . . . . . . . . . . . . . . . . . .274.60* –3.30 298.70 184.25 Pennon . . . . . . . . . . . . . . . . . . . .574.50 +2.00 587.50 434.40 Tullett Prebon . . . . . . . . . . . . . . .352.90 –0.10 436.20 261.20
British Amer. Tob . . . . . . . . . . .2259.50 –23.00 2335.50 1807.00 Hammerson . . . . . . . . . . . . . . . .392.90 +2.20 460.30 325.00 Persimmon . . . . . . . . . . . . . . . . .369.70 –0.60 534.50 340.20 Tullow Oil . . . . . . . . . . . . . . . . .1273.00 +34.00 1375.00 970.00
British Empire Tst . . . . . . . . . . . .437.50 –9.00 467.90 338.50 Hargreaves Lansdown . . . . . . . .359.00 +3.60 387.00 209.25 Petrofac . . . . . . . . . . . . . . . . . .1320.00 –25.00 1372.00 730.00 UK Commercial Prop. . . . . . . . . . .79.50 –0.80 84.90 62.25
British Land . . . . . . . . . . . . . . . .472.30* +6.30 532.00 402.00 Hays . . . . . . . . . . . . . . . . . . . . . . .94.30 +0.45 119.00 85.75 Petropavlovsk . . . . . . . . . . . . . .1066.00 –33.00 1370.00 601.00 Ultra Electronics . . . . . . . . . . . .1613.00 –53.00 1681.00 1094.00
Britvic. . . . . . . . . . . . . . . . . . . . .489.00 –11.50 518.00 316.25 Henderson . . . . . . . . . . . . . . . . .131.50 +1.50 157.80 101.25 Premier Farnell . . . . . . . . . . . . . .240.40 –2.80 252.60 138.00 Unilever . . . . . . . . . . . . . . . . . .1870.00 –58.00 2024.00 1521.00
Brown(N.) . . . . . . . . . . . . . . . . . .234.70* –2.30 284.30 204.80 Heritage Oil. . . . . . . . . . . . . . . . .415.00 +4.50 587.00 368.70 Premier Oil . . . . . . . . . . . . . . . .1533.00 –28.00 1610.00 984.00
BSkyB . . . . . . . . . . . . . . . . . . . .710.50 +6.50 732.00 516.50 Hikma Pharma . . . . . . . . . . . . . .718.50 –13.50 746.00 430.00 Provident Financial . . . . . . . . . . .821.00 –61.50 986.00 786.00 United Utilities . . . . . . . . . . . . . .565.50* –1.00 575.00 429.00
BT . . . . . . . . . . . . . . . . . . . . . . .141.50 –0.70 151.00 108.40 Hiscox . . . . . . . . . . . . . . . . . . . .350.40 –1.10 369.30 291.00 Prudential . . . . . . . . . . . . . . . . . .552.50 +25.00 665.00 422.25 Utd Business Media . . . . . . . . . .558.50 –1.00 579.50 366.00
Bunzl . . . . . . . . . . . . . . . . . . . . .716.50 –11.00 784.50 514.00 Hochschild Mining . . . . . . . . . . .307.00 –6.00 370.60 220.00 PZ Cussons . . . . . . . . . . . . . . . .343.90 –16.10 373.20 210.10 Vedanta Resources . . . . . . . . . .2520.00* +78.00 2967.00 1616.00
Burberry . . . . . . . . . . . . . . . . . . .852.50* –31.50 886.50 436.00 Home Retail . . . . . . . . . . . . . . . .241.80 –0.20 336.50 208.50 Qinetiq . . . . . . . . . . . . . . . . . . . .128.50 –0.90 179.10 113.90 Victrex . . . . . . . . . . . . . . . . . . .1226.00 +45.00 1245.00 613.50
Cable & Wire Comms . . . . . . . . . .60.85* –0.30 150.00 53.00 Homeserve . . . . . . . . . . . . . . . .2325.00* –5.00 2376.00 1336.00 Randgold Resources. . . . . . . . .5700.00 –235.00 6600.00 3351.00 Vodafone . . . . . . . . . . . . . . . . . .150.20* –1.90 153.80 117.30
Cable & Wire Wwide . . . . . . . . . . .68.55* –0.30 94.80 64.85 HSBC Hldgs . . . . . . . . . . . . . . . .666.30 +17.00 766.80 562.60 Reckitt Benckiser . . . . . . . . . . .3241.00 –92.00 3667.00 2686.00 Weir . . . . . . . . . . . . . . . . . . . . .1219.00 –31.00 1266.00 524.00
Cairn Energy. . . . . . . . . . . . . . . .471.20 +0.20 485.30 306.80 Hunting . . . . . . . . . . . . . . . . . . .534.50 –5.00 659.50 395.75 Reed Elsevier . . . . . . . . . . . . . . .531.50 –3.00 548.00 403.75 WH Smith . . . . . . . . . . . . . . . . . .427.10 –3.40 551.00 396.00
Caledonia Invs . . . . . . . . . . . . .1619.00 –13.00 1759.00 1496.00 ICAP . . . . . . . . . . . . . . . . . . . . . . 411.50* +10.50 478.30 291.70 Regus . . . . . . . . . . . . . . . . . . . . . .75.90 +1.40 125.50 67.50 Whitbread . . . . . . . . . . . . . . . . .1444.00 –22.00 1645.00 827.50
Capita . . . . . . . . . . . . . . . . . . . . .744.50 –2.50 829.50 643.50 IG . . . . . . . . . . . . . . . . . . . . . . . .476.20 –8.70 492.20 291.00 Rentokil Initial . . . . . . . . . . . . . . .104.50 –4.50 140.20 86.75 William Hill . . . . . . . . . . . . . . . . .171.20 –2.30 217.80 160.50
Capital & Counties . . . . . . . . . . . 113.70 +0.10 125.40 99.60 Imagination Tech Gp . . . . . . . . . .329.10 –3.40 343.70 149.75 Rexam . . . . . . . . . . . . . . . . . . . .340.30 –3.10 348.80 222.50 Witan Inv Tst . . . . . . . . . . . . . . . .448.00 –2.00 487.00 356.00
Capital Shopping Centres . . . . . .354.90 +3.40 580.00 300.10 IMI . . . . . . . . . . . . . . . . . . . . . . .739.00 –25.00 786.00 314.50 Rightmove . . . . . . . . . . . . . . . . .662.00 –2.00 729.00 398.75 Wolseley . . . . . . . . . . . . . . . . . .1448.00 — 1742.00 1155.00
Carillion . . . . . . . . . . . . . . . . . . .315.20 –10.90 361.90 246.25 Imperial Tobacco. . . . . . . . . . . .1820.00* –31.00 2159.00 1624.00 Rio Tinto . . . . . . . . . . . . . . . . . .3355.50 +5.50 4104.00 2205.00
Carnival . . . . . . . . . . . . . . . . . .2331.00 –26.00 2937.00 1649.00 Inchcape. . . . . . . . . . . . . . . . . . .308.60 –8.40 347.00 235.00 RIT Capital Partners . . . . . . . . . 1169.00 –9.00 1215.00 910.00 Wood Group (John). . . . . . . . . . .369.60 +0.20 411.70 261.50
Catlin . . . . . . . . . . . . . . . . . . . . .383.60 –2.40 394.60 303.20 Informa . . . . . . . . . . . . . . . . . . . .394.70 +7.10 439.40 225.00 Rolls Royce . . . . . . . . . . . . . . . .593.50 –9.50 631.50 367.75 WPP . . . . . . . . . . . . . . . . . . . . . .682.00 –4.50 744.00 440.00
Centamin Egypt . . . . . . . . . . . . .153.80 –4.80 174.75 80.00 Inmarsat . . . . . . . . . . . . . . . . . . .753.00 –1.00 831.00 491.00 Rotork . . . . . . . . . . . . . . . . . . .1414.00 –24.00 1482.00 869.00 Xstrata . . . . . . . . . . . . . . . . . . .1031.50 –5.00 1344.50 713.00
Centrica . . . . . . . . . . . . . . . . . . .307.70 –4.80 320.00 215.50 Intercontl Hotels . . . . . . . . . . . . 1110.00 –89.00 1244.00 629.00 Royal Bank Of Scot . . . . . . . . . . . .50.35 +3.68 58.95 28.25 Yell Group. . . . . . . . . . . . . . . . . . .30.19 +3.44 86.00 22.42
Charter Intl . . . . . . . . . . . . . . . . .754.00 +11.00 855.50 486.00 Intermediate Capital . . . . . . . . . .270.50* +2.50 332.00 170.25 Royal Dutch Shell A . . . . . . . . .1821.50 –2.50 2068.50 1521.50 LONDON TOP 250 BY MARKET CAPITALISATION
Chemring . . . . . . . . . . . . . . . . .2996.00* –70.00 3711.00 1993.00 Intertek . . . . . . . . . . . . . . . . . . .1669.00 –8.00 1745.00 1024.00 Royal Dutch Shell B . . . . . . . . .1745.00 –5.00 1997.50 1505.00
Chloride Group . . . . . . . . . . . . . .373.70* +0.20 390.50 130.75 Intl Personal Fin . . . . . . . . . . . . .244.80 +7.20 283.00 127.00 RSA Insurance . . . . . . . . . . . . . .128.90 +1.90 142.00 114.10 * Ex-Dividend † Suspended
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Cobham . . . . . . . . . . . . . . . . . . .239.50 –4.60 278.60 173.20 Invensys . . . . . . . . . . . . . . . . . . .293.00* –2.20 350.30 234.50 Sage . . . . . . . . . . . . . . . . . . . . . .248.50 –3.40 260.50 183.50 www.interactivedata.com


 
 "      #
$#

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           # $   

FTSE 100 climbs to a 10-week high as Mixed earnings dampen

strong UBS results boost bank sector recent Wall Street rally
The consumer confidence figures Bank of Scotland and Barclays grab- including US Steel and AK Steel

THELONDON came in a touch weaker, and that’s

weighed on the market this after-
noon,” said Manoj Ladwa, senior trad-
bing the top three spots on the blue-
chip leader board, up between 7.6 and
8.8 per cent.
THENEW YORK Holding.
“I still have a favourable view of the
market, but I think the extreme move
REPORT er at ETX Capital.
US consumer confidence sank in
July to its lowest since February on
Investors, still upbeat after the
European bank stress tests published
late on Friday unearthed no nasty sur-
REPORT in the last few days warrants some
consolidation or pullback,” said Nick
Kalivas, senior equity index analyst at

B
RITAIN’S top share index hit a job market worries, underscoring the prises, cheered news that strong equi- MF Global in Chicago.

T
10-week closing high yesterday, slow path to economic recovery. ties and currency revenues drove he S&P snapped a three-day win- The Dow Jones industrial average
as a buoyant banking sector “If it weren’t for banks we’d be UBS’s second-quarter net profit well ning streak yesterday after added 12.26 points, or 0.12 per cent,
boosted by strong results from firmly in negative (territory)... UBS’s above forecasts. mixed earnings reports and a to 10,537.69. The Standard & Poor's
Swiss lender UBS countered weak US results have propped up the sector Among individual movers, drug- fall in consumer confidence, 500 Index dipped 1.17 points, or 0.10
consumer confidence data. today, and there’s a general good feel- maker AstraZeneca rose 2 per cent as but analysts said US stocks were tak- per cent, to 1,113.84. The Nasdaq
The FTSE 100 closed up 14.55 ing about banks, certainly after the US Food and Drug Administration ing a breather and the rally could Composite Index shed 8.18 points, or
points, or 0.3 per cent, at 5,365.67, its stress tests last week, so we’re seeing documents, released ahead of a 28 pick back up. 0.36 per cent, to close at 2,288.25.
highest closing level since 13 May, that continued knock-on effect,” July advisory panel, raised hopes for Solid earnings from Dow compo- Economic data was mixed. Home
having retreated from an intra-day ETX’s Ladwa said. its experimental blood thinner nent DuPont and Cummins cheered prices rose in May, but labour-market
peak of 5,411.45. Banks were the standout gainers, Brilinta. AstraZeneca is due to post investors, but that was offset by worries took July consumer confi-
“We pulled back from the highs. with Lloyds Banking Group, Royal second-quarter results tomorrow.. gloomy comments from steelmakers, dence to its lowest since February.
 20 Investment | Foreign Exchange CITYA.M. 28 JULY 2010

DOLLAR HAS
POTENTIAL
TO REBOUND
BORIS SCHLOSSBERG
DIRECTOR OF CURRENCY RESEARCH, GFT

T
HE biggest story in the currency market last
week was not the Eurozone stress tests, but
rather the surprisingly robust economic
results reported by Germany and France.
While the stress tests proved to be entirely anti-
climactic, the news on the economic front was
much better than expected. Eurozone flash PMI
surveys for July handily beat forecasts indicating
that activity remains well above the 50
boom/bust line while the IFO survey saw the
biggest monthly jump since German reunification.
The news from the Eurozone suggests that
growth in the second and third quarters of this
year may be stronger – good news for investors
concerned about European banks’ balance sheet
exposure to sovereign debt. Any sign that the
economies in the region will grow at a faster
than expected pace should minimise the risk of Better than expected growth has helped to boost sterling Picture: GETTY
default and prove supportive to the euro. Still,
having risen more than 1,000 points off its year-

Sterling’s time to shine

ly lows, the rally in the euro-dollar has clearly run
into resistance at the $1.3000 level and I believe
it is likely to stall in this area until September.
As we enter the dog days of summer the main
debate in the currency market remains between
the bulls who argue that the recovery trade is
alive and well and the bears who predict a mas-
sive slowdown in economic activity in the second
half of the year. Since the US economy repre- The summer has been Committee (MPC) member Andrew
Sentance, who has now twice called for a
$1.52 to $1.53 level without negating the
upward momentum in the pair. Currency
sents nearly 25 per cent of global demand, it is
the lynchpin for both scenarios. The recent spate kind to the pound, rate rise to fight stubbornly-high inflation.
RBS’s Melinda Burgess says: “The sticki-
traders should therefore look to use these
short-term pullbacks to buy. Hewson is also
of disappointing US data has driven US yields
lower and dragged dollar-yen down with them. writes Jessica Mead ness of inflation and the stronger-than-
anticipated pace of growth will raise
bearish on the euro against sterling. He
admits we have recently seen a bit of a
However, with the pair having found support expectations – wrongly in my opinion – of squeeze but thinks that while we remain
near the ¥86 level, any upside surprise this week earlier rate hikes from the Bank of England. below £0.8420, we could see a break of

S
could spur a rally back towards ¥89 as the TERLING might not have become the
recovery trade gets a second wind. darling of the FX markets but it has
The focus this week will shift to North certainly shed its image as their
America as US data dominates the economic whipping boy. In what has been
calendar. The key event will be this Friday’s US described as an ugly contest between the
GDP report with the market anticipating a read- G4 currencies (US dollar, sterling, euro and
ing of 2.5 per cent versus 2.7 per cent the period yen), the pound is looking the rosiest.
prior. If the data meets or beats expectations, Last week’s GDP figures, which showed
then the news should provide a lift for dollar-yen stunning growth between April and June,
as double-dip fears begin to fade away. has certainly given sterling a boost – the
Boris Schlossberg and Kathy Lien are direc- pound rose to its highest level against the
tors of currency research at GFT. Read commen- dollar since April yesterday, hitting $1.5520.
tary at www.GFTUK.com/commentary or e-mail In contrast to Britain, US economic data
borisandkathy@gftuk.com. has been far from buoyant with jobs fig-
ures, housing data and leading indicators
all raising fears of a double-dip in the
world’s largest economy.
And although concerns about the
impact of the coalition’s austerity measures
have not vanished entirely, the strong sec-
ond quarter performance has given more
credence to the likes of Monetary Policy
With the market trading on interest rate £0.8320 and then even to £0.80 as sovereign
differentials, this will support sterling.” debt risks and financial stresses continue
“The UK now looks to be on a better foot- to take their toll.
ing heading into this period of austerity, For now, the pound is putting in a ster-
implying that while spending cuts and tax ling performance at the G4 beauty contest.
rises will have a negative effect on the econ- Make the most of its lustre while the sum-
omy, a double dip recession looks unlikely. mer sun continues to shine.
Sluggish but positive growth is the more
likely scenario.” ANALYSIS l Sterling-dollar over the
CMC Markets’ Michael Hewson agrees past three months
but notes that we could see an interesting $
fourth quarter GDP figure as consumers 1.54
try to bring forward spending on big ticket
items ahead of the VAT hike to 20 per cent. 1.52
Sterling yesterday struggled to make it 1.50
past the solid resistance level at $1.5533
despite a strong CBI retail survey. This is 1.48
about fair value for the dollar, reckons 1.46
Hewson, who sees sterling-dollar continu-
ing to trade between $1.50 and $1.60 with 1.44
the risks to the upside. However, he thinks
that we could see sterling drift back to the 10 May 24 May 7 Jun 21 Jun 5 Jul 19 Jul

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CITYA.M. 28 JULY 2010 Investment | Foreign Exchange 21

THE
The real test TIPSTER
STERLING IS

for the euro is BATTLING A

EURO RALLY

T
HE Canadian dollar continues to look
strong on the back of a firmer oil price,

yet to come especially against the yen, which is a

net importer of oil. But having traded in
a range of ¥86.40-¥82.00 over the last few
weeks, the loonie looks to be testing the top
of its recent range. Look to sell Canadian dol-
lar-yen around ¥86.30 and WTI crude oil
anywhere close to $81. CMC Markets’ spread
Traders should be wary of embracing undue on Canadian dollar-yen of ¥85.30-¥83.35 and
WTI Crude $79.50-$79.56.
Eurozone optimism, writes Juliet Samuel Likewise against the greenback: the loonie
has found some strength against its larger
cousin in recent weeks but the break below

W
ITH the European Central Bank’s
(ECB) stress tests now out, euro
optimists are coming out of the
woodwork. Goldman Sachs
upgraded its forecast to predict the euro
will hit $1.35 against the dollar in early
2011, while ETX Capital similarly forecasts
that its current rally could last to the $1.35-
36 level. Evolution Securities is likewise
bullish about the Eurozone, declaring the
consensus to be “far too downbeat about
the outlook for Eurozone growth.”
Optimists point to better-than-expected
Eurozone data, such as industrial produc-
tion figures, as indicative of underlying
strength. In its monthly FX update,
Goldman suggests “the risks are more man-
ageable” than they were, citing Europe’s
balance of payments surplus and the trans-
parency of the stress tests as evidence. As a
result, Goldman’s 2010 GDP growth fore-
cast for the Eurozone is above consensus at
1.4 per cent.
This shows that many analysts now
believe that euro strength will come not
just in relation to the dollar on the back of
weak American data, but because the euro
has been oversold. ETX Capital’s David
Hutchings agrees with Goldman that the
stress tests have buoyed market confidence:
“It’s given some reassurance to the market.
There was some fear that more banks
would fail but seven out of 91 was not too
bad and we’re now resuming the upward
trend of the last month and a half.” Figures
in the last week seem to bear him out, with
the euro rising from its Friday low of $1.28
to over $1.30 yesterday.
But while many think that the euro
could be past the worst of its troubles, oth-
ers maintain that little has changed. Last
month, Lombard Street Research’s Gabriel
Stein forecast that the euro would fracture
over the next five years due to a likely Greek
default. He says: “To keep the euro, they
have to fuse fiscally; otherwise they will
split.” As for the stress tests, he is scathing:
“It’s like a saying from the days of the
Soviet bloc: ‘we pretend to work and they
pretend to pay us’. The tests were done to
pretend we can all relax now but there are
still so many question marks.” He high-
lights the failure to test banks’ strength in
the event of a sovereign default as a major
point of uncertainty.
And despite the euro’s rally against the
greenback, it has so far failed to regain the
ground lost to sterling after the release of
last week’s strong UK GDP figures. Forex
brokers suggest that medium-term pound-
euro strength is here to stay:
Currencies.co.uk’s Stephen Hughes says the
number of limit orders to buy euros if ster-
ling hits €1.25 has increased 35 per cent
since last week, whereas before traders
were settling for a more pessimistic €1.20.
Ca$1.0300 seems to have been a stretch too
far, despite the worsening economic data
that continues to flow out of Washington
with US consumer confidence being the lat-
est metric to disappoint. Falling oil prices
have been cited as a key driver behind the
reversal of fortunes but assuming the
resource economies continue to grow it’s
only a matter of time before further rate
hikes are seen from Ottawa. The current IG
Index price on dollar-Canadian dollar is
Ca$1.0325-Ca$1.0328.
And, to come full circle, dollar-yen seems
Meanwhile, despite the positive figures, The real euro storm is to have bottomed out at the ¥86 level,
most fiscal squeezes have yet to come into still on the horizon. buoyed up by the recent upbeat European
effect. The real test of the Eurozone’s stabil- and US earnings data. Dollar-yen has broken
ity will not be issued by the ECB, but by the Picture: GETTY its 20-day moving average for the first time
forex markets and their response to the since 17 June and a close above ¥88.15
financial and political upheaval to come. should see a short-term target of ¥89.20.
Intraday support lies at ¥87.35 with stop
ANALYSIS l Eurozone periphery risk premium remains losses below ¥86.80. Decent sell interest has
1.55 Source: Bloomberg/Goldman Sachs been noted at ¥88.15, ¥88.70 and ¥89.10.
Spread Co quotes dollar-yen at
1.50
¥87.75–¥87.78.
1.45
Sterling has broken new territory against
1.40 the euro since the release of second quarter
1.35 GDP growth surprised to the upside. It sank
Risk
1.30 premium back after breaching the €1.2 level but it is
1.25 Euro-Dollar unlikely that confidence in the European
Euro-Dollar (adjusted), with CDS bank stress tests will be enough to prompt a
1.20
Euro-Dollar (adjusted), no CDS
1.15 euro breakthrough. Capital Spreads quotes a
1.10
sterling-euro price of €1.1945-€1.1949.
Sep 2009 Nov 2009 Jan 2010 May 2010 May 2010 Jul 2010 Sep 2010 Juliet Samuel

FOREX ANALYST PICKS

FOREX STRATEGIST FOREX STRATEGIST FOREX STRATEGIST
JOEL KRUGER JOHN KICKLIGHTER ANTONIO SOUSA

My pick: Short New Zealand dollar against the US dollar at $0.7350
Expertise: Classic technical analysis
Average time frame of trades: 1 week-6 months
Despite the latest surge, the market shows some formidable resist-
ance on rallies above $0.7300 and we continue to like the idea of
fading Kiwi support at this psychological barrier. Longer-term tech-
nicals also confirm a bearish bias, with the market likely to roll over
in favour of some deeper setbacks towards $0.6500. A daily close
below $0.7250 should accelerate declines towards the initial sup-
port of $0.7000, which could then reach our $0.6500 objective.
My pick: Long dollar-yen above ¥88 and long euro-yen above ¥113.50
Expertise: Fundamental and technical analysis with risk management
Average time frame of trades: 1 day-1 week
I am sceptical of the EU stress test results that were released last week
and I don’t think the advance in risk appetite will last. Nonetheless, the
market will go where it will; so I will maintain my position for a poten-
tial euro-yen break above the ¥133.50 level, with a stop at ¥111.15. I
will target ¥117. Another position I like is a long dollar-yen, which looks
ripe for a reversal and is more risk neutral. I will look for a bullish dollar
break above the ¥88 level, with a stop at ¥86.60.
My pick: Buy Aussie-dollar at the market rate
Expertise: Global macro,
Average time frame of trades: 3 months
I expect higher-yielding commodity currencies to continue to out-
perform after the release of better-than-expected second quarter
earnings reports in the US triggered a shift in investors’ sentiment
towards more risk taking. In particular, I expect the Australian dol-
lar to gain further against the Japanese yen due to the interest rate
differential, which is likely to grow since the Japanese economy
remains plagued with deflation.
 22 Investment | Fund Management CITYA.M. 28 JULY 2010

DEFEND YOUR
PORTFOLIO IN
TOUGH TIMES
DICK TURPIN
MANAGING DIRECTOR, ARTEMIS

S
O NOW we know. The economic environment
is “unusually uncertain”, apparently. Ben
Bernanke, chairman of the US Federal
Reserve, has confirmed what everyone knew
already.
Reform – in particular the discharge of debt –
has to take place in the midst of the western
world’s inevitable and longstanding entanglements,
obligations and historical inhibitions. This was
never going to be a straight, Roman road. The
FTSE 100 has already seen a high this year of
5,825 and a low of 4,805. We expect the summer
trading range to continue.
Yes, there are short-term opportunities, but The Lebanon is a major growth area in the Middle East Picture: GETTY
these are unpalatable, even Ocadian – and impru-
dent. The better ones lie in stock selection. I’ve
been looking this week at the stunning perform-
ance delivered by Berkshire Hathaway and the
renowned Sequoia Fund between 1975 and 1982.
Despite the S&P index going nowhere in the 1970s,
39 per cent of the stocks in that index doubled in
price. So which stocks should investors choose
with such care?
Emerging markets 2.0 Saudi Arabia and Kuwait, they should not
Well, Rome rose on the gladius, the legionaries’
brutal, short, stabbing sword. When the empire
The Middle East and North Africa are fertile ignore the oil importers. Al Hashemi says
that non-oil producing nations in the
passed to defensive descent before its reincarna-
tion in the east, the long sword (spatha) steadily areas for growth, writes Kathleen Brooks region also benefit from petrodollars
through greater levels of investment. “This
took the place of the gladius: the former was a wealth filters through to the neighbouring
weapon for keeping the enemy at bay, or for reach- countries, for example, Jordan, Lebanon

ing him from a defensive position. For the time
being at least, defense is the best form of offence.
Stick to the basics. One criterion is cash. Investors
should seek out stocks with money on their bal-
ance sheets. There are many good companies out
there – I am of course too compliant to name them
– which have cash equivalent to half or more of
their market capitalisation. And yet, often these
stocks are trading, if you strip out the cash, on
price/earnings ratios as low as 7 times earnings.
M&A is another theme. Most recently Reckitt
Benckiser has bid for SSL, and a consortium has
set its cap at Tomkins. Businesses are rightly
unsure about the outlook and they hesitate to
build, say, a new factory. But buying another busi-
ness that has ballast is quite another thing. Macro
matters will meander. Some companies will contin-
ue to thrive.
I
NVESTORS have developed an addic-
tion to emerging markets in recent
years. But what happens when the tra-
ditional emerging economies of
South East Asia start to mature? Where are
the next fertile regions for growth? The
frontier markets of the Middle East and
North Africa, collectively known as the
Mena region, are a good bet.
Frontier markets have many of the same
attractions as emerging economies; for
example, public finances are in good shape
compared to the west (see chart), there are
high levels of infrastructure spending and
there is growing domestic demand. But
one thing differentiates Mena states:
demographics. Population growth across
the region is expected to exceed 2-2.3 per
cent per annum, says Ghadir Abu Leil-
Cooper, Baring Asset Management’s head
of Europe Middle East and Africa (EMEA).
This is attractive relative to the developed
world, but also relative to some emerging
economies; for example, China, which has
an aging population.
“There is a young and aspirational popu-
lation in the Middle East,” says
Mohammed Al Hashemi, head of asset and Syria.”
management for Invest AD – formerly Abu Fund performance across the region is
Dhabi Investment Company. In the last five also impressive. Year-to-date HSBC’s GIF
years, mobile phone penetration across the Middle East and North Africa equity fund
region has increased five-fold. has posted a return of 8.14 per cent accord-
The next big growth area is banking ing to Morningstar, the fund research
services, says Abu Leil-Cooper. She invests provider. JP Morgan’s Emerging Middle
almost half of her fund in the financial sec- East equity fund has returned just over 14
tor, with just over 20 per cent invested in per cent since the start of this year.
industrials. “In Egypt, the mortgage mar- If emerging markets are the Holy Grail
ket is virtually non-existent. This creates a for investors, don’t ignore the Middle East.
very exciting opportunity for retail bank-
ing.”
Investors concerned about last year’s ANALYSIS l Current account surpluses
Dubai crisis can rest easy. Al Hashemi says in the Mena region
that across the region lessons have been 10 % of GDP Source: IMF
learnt from the crisis: “Every emerging
market needs to go through these crises. It
5
has actually helped investors since it has
shown the need for tighter corporate gov-
ernance and transparency.” 0
So where are the most attractive invest-
ment opportunities? Abu Leil-Cooper
-5
invests nearly half of her fund in Egypt and
the United Arab Emirates. While investors
may be more comfortable with the oil-pro- -10
ducing states such as Abu Dhabi, Qatar, 2004 2006 2008 2010
CITYA.M. 28 JULY 2010 Investment | Fund Management 23

Dividend funds
Equity income funds
are riding high

Picture: GETTY

an alternative
to fixed income
High yielding stocks are a rival to bonds in
the current environment, writes Jessica Mead

W
ORRIED investors have once
again been gravitating towards
fixed income funds to shield
themselves from the gloomy US
outlook and concerns about financial sta-
bility in the Eurozone. But flow data from
EPFR Global also suggested that “enough
money found its way into emerging mar-
kets equity funds to suggest that yield
remains a real concern”.
Yield-seeking investors have struggled
of late: most equities are still perceived as
too risky yet the yields on the perceived
safe havens of UK gilts and US Treasuries
have been falling. So much so indeed that
the yield on the FTSE 100 has exceeded
that of 10-year gilts. Even adjusting for BP,
the prospective yield on equities is cur-
rently around 3.6 per cent, well ahead of
its 30-year average, says David MacEwen,
chief investment officer for fixed income
at American Century Investments.
Consequently, high dividend funds have
become popular. Pictet Funds, the fund
distribution arm of Swiss private bank
Pictet & Cie, recently launched its High
Dividend Selection fund.
The UCITS-III fund will invest in listed
global stocks which have predictable and
stable cash flows and which have a mini-
mum dividend yield of 3 per cent. This
generally means utilities, telecoms, ener-
gy infrastructure such as pipelines and tainable manner, that are sensibly man- ANALYSIS l Dividends paid out by the cyclical(inc. oil) & defensive
transport. The fund commits to pay aged and financed and that allocate share- sectors
investors an annual dividend of 4 per cent, holders’ funds with a view to long-term
which can be received either monthly or returns on capital.” Billions
annually or it can be reinvested. In the Newton’s chief executive Helena
event that the fund’s holdings yield more Morrissey says: “By investing over the long £20
than 4 per cent in a particular year, it will term in income-generating equities, we £18
£16
pay a special dividend. believe investors could enjoy real growth £14
The attractiveness of income-generating in income together with long-term capital £12
equities is supported by Bank of New York growth.” £10
Mellon Asset Management’s subsidiary And for fixed income-biased investors, £8
Newton. In a recent paper putting forward investing in high dividend equities can £6
the case for equity income investing, give you both a better yield and a different £4
Newton says: “A focus upon companies type of risk, says Bruno Lippens, senior £2
£0
that pay a regular cash dividend leads investment manager at Pictet. H109 al
investors to hold a portfolio that is com- Diversification, income and capital Cyclic
prised of companies that are reasonably growth; high dividend equities appear to H110 sive
valued, that generate cash flow in a sus- have it all. Source: Capita Registrars Defen

FUND MANAGEMENT NEWS

KATHLEEN BROOKS
Hedgies have beat the markets this year, but only just
HEDGE FUND REVIEW IS LESS THAN ROSY
The Dow Jones Credit Suisse Hedge Fund
Index released its first half 2010 industry
review yesterday and it was fairly sober read-
ing. The good news was that, so far in 2010,
hedge funds have outperformed many global
stock indices. However, the returns were far
from lacklustre at 0.6 per cent for the year
through to 30 June. The top-performing strate-
gies included fixed income arbitrage, global
macro and event driven. Overall, hedge funds
experienced net outflows of $1.4bn in the first
quarter. However strategies with low correla-
Picture: GETTY tions to traditional markets saw net inflows.
BNY MELLON GETS RUSSIAN APPOINTMENT
The corporate trust of BNY Mellon has been
appointed trustee, paying agent, calculation
agent and transfer agent for
Vnesheconombank’s $30bn Loan Participation
Note Programme (the “LPN Programme”).
Vnesheconombank, also known as the Bank for
Development and Foreign Economic Affairs,
was founded in 1924 and is one of Russia’s
most established banks. A spokesman for BNY
Mellon said that the debt market in Russia had
rebounded after a quiet period last year. BNY
Mellon will provide all of its debt servicing and
maintenance requirements.
MORNINGSTAR RATES NEW FUNDS
The independent fund research firm issued its
first fund rating for the Invesco Perpetual
Corporate Bond Fund and awarded it the “elite”
rating, its top fund rating. Morningstar said it
was impressed by the level of experience of its
two fund managers Paul Causer and Paul Read.
Two new Gartmore European funds received
superior ratings from Morningstar last week,
while the Goldman Sachs Global Emerging
Markets (GEM) Concentrated Equity fund was
put under review after the head of the team
Maria Gordon, left the firm. Morningstar said it
did not think the change was fatal to the fund.

Each determined, tenacious and above all independent.

Yet united in a common cause.

Talk to your Financial Adviser, call 0800 092 2051 or visit www.artemisonline.co.uk
Issued by Artemis Fund Managers Limited which is authorised and regulated by the Financial Services Authority (www.fsa.gov.uk), 25 The North Colonnade, Canary Wharf, London E14 5HS.
For your protection calls are usually recorded. CAM/AE
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24
| Motoring WORDS BY
RYAN BORROFF
Hallelujah: Peugeot’s latest
car really, truly makes sense
The 3008 combines
O
K, I’m going to come clean. I distrust
crossover cars, or crossover utility
total convenience for vehicles (CUVs). In the past when I’ve
driven them I’ve tended not to like
families with a good them. Neither one thing or another, they
have always seemed to me to be the mon-
grels of the car world, compromised and
bit of fun under the with an identity crisis. Despite a promise of
combining the best advantages of different
bonnet. Marvellous categories of vehicles they often seem to
end up doing nothing particularly well.
I mean, in the cold light of day,
why would I want an SUV that’s also an
MPV that’s also a hatchback? Are these not
cars for the chronically
indecisive?
Yet actually after a week driving one I’ve
just discovered who these cars are for.
Me.
Or at least people like me. Who knew?
And it’s not as if your first look at the
Peugeot 3008 promises much. It isn’t ugly,
but it’s hardly a looker. It even looks like an
automotive mix-up of SUV and hatchback. I
am largely indifferent to its styling. I expect
to feel the same way about the car. It’s not a
great start.
Yet once inside, the 3008 is impressive.
The interior quality is surprisingly good, a
combination of leather, high quality plas-
tics and silver for switchgear and decora-
tion. The car is very comfortable and
surprisingly roomy for everyone except the
driver. Space here is a little compromised
due to the driver-orientated cockpit which
succeeds well enough in placing all of the
THE FACTS: controls and switchgear within reach. The
result feels snug. And you sit high up, like
PEUGEOT 3008 SPORT HDI 150 you do in an SUV, and thanks to so much
PRICE: £20,195 glass the car is light and airy and affords
loads of visibility.
0-62MPH: 9.7secs The 3008 also has a Grip Control system
TOP SPEED: 121mph which allows you to change the car’s grip
CO2 G/KM: 146g/km for a range of driving conditions – such as
MPG COMBINED: 50.4mpg snows, ice, sand and mud. It’s a safety fea-
ture and combined with the tow bar that
THE VERDICT: sits at the back of our test car, it’s quite clear
that Peugeot expects the car to be popular
DESIGN hhhhi with caravaners. The Grip Control dial occu-
PERFORMANCE hhhii pies a similar location as BMW and Audi’s
PRACTICALITY hhhhi MMI systems. I immediately try to tune the
VALUE FOR MONEY hhhhi radio. Instead I change the car’s set-up to
CAR TALK
BY RYAN BORROFF
The facts:
you can afford a Mercedes
The figures:
mercedes-benz.co.uk/offers
For more information on our tailor-made
packages or to book a test drive, visit us online.
SUZUKI’S SWIFT GETS BETTER LE MANS COMES TO LONDON
This is the new, third generation Suzuki Swift which The world’s finest motor race is coming to London. 5
goes on sale in the UK in the autumn. Can you spot the September will see a unique display of spectacular
differences with the outgoing model? No? Neither can 220mph+ Le Mans cars – including Steve McQueen’s
we...but it's lighter, stiffer, safer, cleaner and more eco- 1970 Porsche 917 – and a chance to meet some of the
nomical. At 116g/km, it will be one of the cleanest drivers that drove them. Classic sports and perform-
petrol engine superminis on sale. Which means Suzuki's ance cars will also be on show at the Royal Hospital
great little car is now even better. Chelsea. www.chelseaautolegends.com.
CITYA.M. 28 JULY 2010
“drive on sand”. The ease of reaching these
controls seems counter-intuitive as logically
I am going to want to access the audio con-
trols about a 100 times more often than the
ones that change the drive setup.
Meanwhile, the audio controls sit in front of
the gear shift. I immediately want to trans-
pose them. I wonder if I will be the only driv-
er of this car that is annoyed by this. Still, it
is the only complaint I have. The front seat
passenger gets a rugged grab handle to
underline the SUV genes at the heart of the
drive system. It seems unlikely that they will
need it very often.
This 3008’s 150bhp Hdi diesel engine feels
delightfully powerful and quick and is sur-
prisingly quiet at speed (if not around
town), yet it remains economical enough to
feel like a sensible option. In short, it’s a car
that can please your head as well as your
heart.
There are two areas where the 3008 is just
marvellous. One is the car’s handling. How
can this be, that a car this practical can also
be enjoyable? Is it some kind of motoring
alchemy? In fact, it’s due to some clever
shock absorbers in the rear suspension
which ensure the car is taut so that there is
little body roll, making it genuinely fun to
drive. It gives the 3008 far more of a hot
hatch feel than an SUV ride.
The other is the boot. Who knew a boot
could be this impressive? It swallows all of
our stuff and then offers up a second floor.
Fantastic: a multi-story boot. Its false floor
can be set to different heights while a split
tailgate ensures you can still access its con-
tents. It’s even got those springy nets that
stop bottles of wine from rolling around.
Shock, horror: the boot has been designed
to actually carry real world things. People at
Peugeot scratched their heads and found
solutions to how people actually use their
cars – and it shows.
The boot stowage is a revelation. Having a
young family, we were inches away from
signing up and buying one immediately. It
felt like the car had been designed exactly to
address our needs right down to the built-in
blinds to keep the sun out of the baby’s eyes.
The Peugeot 3008 is targeted so accurately
at the family market it scores a bullseye.
AUDI A7
Audi has entered another segment. Its new A7
Sportback has just been launched at a private event in
Munich. Essentially a larger, more luxurious A5, the
large five-door coupe will rival BMW’s 5 Series GT and
Mercedes CLS and will cost more than £43k when it
hits the UK early next year. Tech fans will appreciate a
wide range of clever electronica.
CITYA.M. 28 JULY 2010 Lifestyle | TV& Games 25

BBC1 BBC2 ITV1 CHANNEL4 FIVE

TERRESTRIAL
6pm BBC News
6.30pm BBC London News
7pm The One Show
7.30pm Penguin Island: The
parents struggle to find food
for their chicks; BBC News
8pm CHOICE Celebrity
MasterChef
9pm Traffic Cops
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10.25pm Regional News
10.35pm The National Lottery
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10.45pm FILM Man of the
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12.40am Sign Zone: Country
Tracks
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BBC News
5pm Live Athletics: European
Championships: Including the
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9pm Coast: Neil Oliver visits a
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10pm QI: With Alan Davies
Jimmy Carr, Phill Jupitus and
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10.30pm Newsnight; Weather
11.20pm How to Beat Tough
Times: Money Watch: The
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series.
12.20am On the Frontline: Life
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Close
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2.30am FILM Cheyenne Autumn:
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11.55pm Poker Dick Strawbridge, Jennie Bond, Marcus
Album Chart Show Spotlight Patrick, Kym Mazelle and Dean Macey
1.05am Big Brother: Live 2.30am 1am SuperCasino 4.05am House
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3.25am FILM Kiss Tomorrow 4.55am Animal Rescue Squad Gregg Wallace with their cooking skills.
Goodbye 1950. 5.05am-6am 5.10am The New Tomorrow
Triathlon ITU World Championship 5.35am-6am Michaela’s Wild
Series Challenge

SKY SPORTS 1 10pm Modern Pentathlon LIVING 2005. 10.40pm Tim Minchin: 4.40am Unsolved History
SATELLITE & CABLE

7pm Football’s Greatest
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EuroPro Tour Golf. From the
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2.30am-3.30am Modern
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BRITISH EUROSPORT
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6.30pm AFL Review Show
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Big Meets Bigger 9pm FILM
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E4
7pm Hollyoaks 7.30pm Friends
9pm FILM The Wedding Date
Live 12.50am-6am Big 5.30am-6am How Does That
Brother: Live Work?
HISTORY DISCOVERY HOME &
7pm Ships That Changed the HEALTH
World 8pm The Panama Canal 7pm From Here to Maternity LION COUNTRY
9pm Decoding the Past 10pm 8pm 10 Years Younger 9pm ITV1, 7.30PM
Victorians Uncovered 11pm Hospital Sydney 10pm Untold Three lions from the Zambian pride
Marked 12am The Panama Stories of the ER 11pm The encounter two buffalo and risk their
Canal 1am Ships That Changed Trauma Team 12am Hospital lives in a chase, while sisters Temi and
the World 2am Operation Sydney 1am Untold Stories of Tswana go in search of smaller prey.
Valkyrie 3am Stolen by Hitler the ER 2am The Trauma Team
4am-5am Decoding the Past 3am 10 Years Younger 4am
Baby Days 5am-6am Babes in
DISCOVERY the Wood
7pm London 2012 Aquatics
Centre Megabuild with James SKY1
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Do It? 8.30pm How It’s Made FILM Ocean’s Eleven 2001.
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10.30pm Chris Barrie’s 12.45am Women Who Kill
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Warp 12am Deadliest Catch casualty department. 2.40am FIVE, 11PM
1am Bear Grylls: Born Survivor Road Wars 3.30am Shear Cobb feels responsible when Glue Boy is
2am Industrial Revelations Genius 4.20am Project injured, so he decides to go undercover
3am Stephen Hawking’s Runway 5.10am-6am Are You as a member of the gang he belonged
Universe 3.50am Weaponology Smarter Than a 10 Year Old? to before his imprisonment.

COFFEE BREAK
Copyright Puzzle Press Ltd, www.puzzlepress.co.uk

QUICK CROSSWORD
   

SUDOKU KAKURO
22 38 23 16 24 12 
4 5 12
17 18 
35 23
Place the numbers from 1 to 9 in each empty cell so that each 24  
row, each column and each 3x3 block contains all the numbers Fill the grid so that each block 45
from 1 to 9 to solve this tricky Sudoku puzzle. adds up to the total in the box 13 21 3
 
above or to the left of it. 10 22
You can only use the digits 1-9 11 8     
   and you must not use the
28 21 37
30 29  
same digit twice in a block. 15
     The same digit may occur 10 15 
12 27 26
  more than once in a row or
column, but it must be in a
15
11
7
10
4

45
    separate block. 
6 34

11 14 13

    ACROSS DOWN
3 Animal skin which 1 Made warm (6)
 
     WORDWHEEL B P
has been tanned (7)
6 Tedium (5)
2 Beguile (6)
3 Exists (5)
Using only the letters in the Wordwheel, you have 7 Bad guy (7)
   4 Incredible or fanciful
ten minutes to find as many words as possible,
L R 8 Banal (5) story (4,4)
none of which may be plurals, foreign words or
proper nouns. Each word must be of three letters O 10 Treat with excessive 5 Newspaper chief (6)

LAST ISSUE’S or more, all must contain the central letter and
letters can only be used once in every word. There
A D indulgence (6)
12 Depicted (4)
9 Of imposing height,
looming (8)
SOLUTIONS KAKURO is at least one nine-letter word in the wheel.
E I 14 Measure of land (4) 11 Division of an ocean (3)

QUICK CROSSWORD 5 8 6 9 5 1 7 2
17 Make possible (6) 13 Mend, fix (6)

( 6 , 0 3 / ( 7 2 1
2 5 1 6 6 2 9 8 SUDOKU          19 Expression of 15 Basement (6)
1 6 7 8 9 3 greeting (5)
8 + , , (
3 9 9 7 4 6 8
         16 Self-centeredness (6)
3 5 ( 6 6 1 ( ; 8 6          20 Milk pudding
+ ( ( / . $ < 4 3 1 7 2 8 9
         18 Indian dish of
5 2 7 2 5 6 8 6 $ 1 3 7 5 2 4 2 1 6 ingredient (7)
         vegetables deep
$
7
:
5 , / / &
)
2 $
7
& +
1 3
4 2
7 4
6 3 1
8 9 5
3 4
WORDWHEEL          21 Close-fitting trousers fried in batter (5)
( 1 $ ' 2 2 (          of heavy denim (5)
6 8 ' $ 1 0 ( 5 , 7 7 5 2 4 4 2 The nine-letter word
7 2 9 8 5 4 2 1          22 Japanese paper-
, & 0 7 ,
was VOICEMAIL         
* 8 $ 7 ( 0 $ / $ & 9 1 8 6 8 9 7 5 folding art (7)
 Sport
26
Results
ATHLETICS
IAAF EUROPEAN CHAMPIONSHIPS (Barcelona, Spain)—
Men’s 10,000m Final: 1 Mo Farah (Gbr) 28mins 24.99secs, 2
Chris Thompson (Gbr) 28:27.33, 3 Daniele Meucci (Ita)
28:27.33. 20km Walk Final: 1 Stanislav Emelyanov (Rus) 1hr
20mins 10secs, 2 Alex Schwazer (Ita) 1:20:38, 3 Joao Vieira
(Por) 1:20:49, 4 Robert Heffernan (Irl) 1:21:00. Women’s
Shot Put Final: 1 Nadzeya Ostapchuk (Blr) 20.48m, 2 Natallia
Mikhnevich (Blr) 19.53, 3 Anna Avdeyeva (Rus) 19.39.
CRICKET
FRIENDS PROVIDENT T20 - Quarter Final:
Northamptonshire v Somerset (Taunton): Northamptonshire
112-6 v Somerset 115-3. Somerset beat Northamptonshire
by 7 wickets.
FOOTBALL
UEFA CHAMPIONS LEAGUE—Third Qualifying Round First
Leg: The New Saints FC 1 Anderlecht 3.
UEFA EUROPA LEAGUE—Third Qualifying Round First Leg:
CSKA Sofia 3 Cliftonville 0.
UEFA EUROPEAN UNDER-19 CHAMPIONSHIP—Semi-
Finals: Spain 3 England 1, France 2 Croatia 1.
FRIENDLY MATCHES: Alfreton Town 2 Rotherham 0,
Altrincham 1 Macclesfield 2, Cambridge Utd 0 Colchester 1,
Curzon Ashton 0 Bolton XI 1, Dartford 0 Millwall 2, Derby 1
Stoke 0, Forfar 1 Dundee 4, Garforth Town 2 Hartlepool 1,
Malmo FF 0 Fulham 0, Nuneaton 0 Northampton 2, Oxford
Utd 1 Man Utd XI 2, Peterboro 1 Leicester 5, Port Vale 0
Aberdeen 1, Reading 2 Wolverhampton 1, SC Neusiedl 1919
0 Arsenal 4, Shrewsbury 0 Coventry 0, Solihull Moors 0
Burton Albion 1, Sutton Utd 0 Staines Town 1, Tamworth 0
Chesterfield 2, Walsall 1 Aston Villa 2, Woking 0 Brentford
4, Workington 0 Darlington 3, York 1 Scunthorpe 0,
Stevenage 0 Watford 2, Doncaster 1 West Brom 0, Bromley
0 Crystal Palace 0.
TENNIS
ATP ALLIANZ SUISSE OPEN (Gstaad, Switzerland)—11st
rnd: Andreas Beck (Ger) bt Agustin Velotti (Arg) 6-3 6-1,
Daniel Gimeno-Traver (Spa) bt (6) Victor Hanescu (Rom)6-4
6-4, (1) Mikhail Youzhny (Rus) bt Marc Gicquel (Fra) 6-2 6-2,
(2) Nicolas Almagro (Spa) bt Marcel Granollers-Pujol (Spa)
7-6 (7-5) 3-6 6-3, Yuri Schukin (Kaz) bt Andrey Golubev (Kaz)
7-6 (7-4) 2-6 6-3, Jeremy Chardy (Fra) bt (8) Paul-Henri
Mathieu (Fra) 6-1 6-3, Jarkko Nieminen (Fin) bt Thiago Alves
(Bra) 6-4 4-6 6-3, Marco Chiudinelli (Swi) bt (3) Thomaz
Bellucci (Bra) 7-6 (8-6) 0-6 6-4.
ATP STUDENA CROATIA OPEN (Umag)—11st rnd: Stephane
Robert (Fra) bt Olivier Patience (Fra) 6-3 6-2, Pablo Cuevas
(Uru) bt Simone Vagnozzi (Ita) 6-4 6-1, Olivier Rochus (Bel)
bt (5) Philipp Petzschner (Ger) 6-2 6-3, Jan Hajek (Cze) bt
Gerald Melzer (Aut) 6-4 6-3, Andreas Seppi (Ita) bt Maximo
Gonzalez (Arg) 6-3 3-6 6-1, Simone Bolelli (Ita) bt Antonio
Veic (Cro) 7-6 (7-3) 6-3, Potito Starace (Ita) bt (7) Sergiy
Stakhovsky (Ukr) 6-3 6-7 (5-7) 6-0, Ivan Dodig (Cro) bt Ivan
Navarro (Spa) 6-3 6-4.
WTA TOUR ISTANBUL CUP (Turkey)—11st rnd: Elena
Baltacha (GB) bt Cagla Buyukakcay (Tur) 7-5 7-6 (7-4), (1)
Francesca Schiavone (Ita) bt Anne Keothavong (GB) 6-2 6-2,
Magdalena Rybarikova (Svk) bt Julia Schruff (Ger) 6-3 6-2,
Elena Vesnina (Rus) bt Bojana Jovanovski (Ser) 6-2 6-0, (5)
Tsvetana Pironkova (Bul) bt Tatjana Malek (Ger) 7-6 (7-4) 6-
2, Sorana Cirstea (Rom) bt Akgul Amanmuradova (Uzb) 7-6
(7-4) 6-3, (3) Anastasia Pavlyuchenkova (Rus) bt Marta
Domachowska (Pol) 6-1 6-0, Ekaterina Makarova (Rus) bt
Virginie Razzano (Fra) 6-2 6-2, Anastasija Sevastova (Lat) bt
(2) Petra Kvitova (Cze) 6-2 0-6 6-4, Anastasia Rodionova
(Rus) bt Basak Eraydin (Tur) 6-1 6-3, Anna Lapushchenkova
(Rus) bt (7) Klara Zakopalova (Cze) 5-7 6-2 6-3, Jarmila
Groth (Svk) bt Anna-Lena Groenefeld (Ger) 6-2 6-1, Johanna
Larsson (Swe) bt (8) Patty Schnyder (Swi) 6-4 6-2.
SPORTS EDITOR JON COUCH
email sport@cityam.com
SPORT | IN BRIEF
Murray sacks coach Maclagan
TENNIS: British No1 Andy Murray will
go into next month’s US Open without a
full-time coach after ending his three-
year association with Miles Maclagan.
It is claimed the world No4 has had a
disagreement with Maclagan over the
role of coaching consultant Alex Corretja.
Corretja was initially brought in to
advise Murray on his clay-court form, but
the relationship has since blossomed to a
wider scale. Murray said: “I’ve had a
great relationship with Miles and I want
to thank him for his positive contribution
to my career.”
Kieswetter leads Sabres charge
CRICKET: England wicketkeeper Craig
Kieswetter struck 33 off 28 balls to help
Somerset through to the Friends
Provident t20 Finals Day with a seven-
wicket victory over Northamptonshire.
A partnership of 147 from Mark
Pettini (81) and Matt Walker (74no)
helped Essex to finals day after they
chased down 183-6 to beat Lancashire.
Two years and counting
1 2
4 5
▲
OLYMPICS 2012
BY JON COUCH
FOUR-TIME Olympic champion Sir
Chris Hoy began the two-year count-
down for London 2012 yesterday and
admitted: “I had goose bumps”.
Sir Chris, 33, became the first per-
son to cycle the Olympic Velodrome
after riding mock-up circuits on a
temporary track as part of a series of
special events across the capital.
At the same time, another four-
time gold medalist, 400m champion
Michael Johnson, ran alongside local
Maradona’s Argentina reign over
FOOTBALL: Diego Maradona was last
night axed as Argentina coach after the
Argentinian Football Association (AFA)
executive committee voted unanimously
not to renew his contract.
The former playing legend was report-
edly keen to remain stay in the job but
rejected a demand from AFA president
Julio Grondona that he change his back-
room staff following his side’s heavy 4-0
World Cup quarter-final defeat to
Germany in South Africa.
England U19s out of Euros
FOOTBALL: England’s Under-19s crashed
out of the European Championships after
a 3-1 semi-final defeat to Spain.
Noel Blake’s side fell behind early on
when Liverpool youngster Dani Pacheco
notched for Spain, and Keko soon strolled
through the defence to make it two.
Tottenham midfielder John Bostock’s
fine volley reduced the arrears before
half-time but a cheeky set-piece, finished
by Sergio Canales, proved the final nail.
school children on a temporary track
in the Olympic Stadium, while for-
mer NBA star John Amaechi shot
hoops at the partially-build basket-
ball arena.
Hoy, who was knighted after win-
ning a hat-trick of golds in Beijing in
2008, helped design the new velo-
drome and is already dreaming of
adding to his tally of gold medals in
two years’ time.
Joined by Mayor of London Boris
Johnson, Hoy said: “To me now the
Games are coming alive.
“Just walking in here you get the
Golden boy Farah leads home
Thompson in British one-two
▲
ATHLETICS
BY JON COUCH
TRACK star Mo Farah became
Britain’s first ever men’s European
10,000m champion last night after
leading home a British one-two in
Barcelona.
The London-based 27-year-old
stormed home in a time of 28 min-
utes, 24.99 seconds, just ahead of GB
team-mate Chris Thompson, who
pipped Italian Daniele Meucci in a
photo-finish to the silver in his first
major championships.
Farah teased Spain’s Ayad
Lamdassem into taking up the pace
with two laps to go, before sprinting
CITYA.M. 28 JULY 2010
1 Michael Johnson
3 runs with a group of
children at the
Olympic Stadium
2 Sir Chris Hoy cycles
round the half-built
Olympic Velodrome.
3 Mayor of London
Boris Johnson, London
2012 chief Seb Coe
(left) and British
Olympic chairman
Colin Moynihan are
joined by volunteers
4 Former NBA star
John Amaechi shoots
6 hoops in the basket-
ball arena
5 Coe and Minister for
Sport Hugh Robertson
hold the Olympic torch
with the Heathrow
Gymnastics Club
6 The aerial view of
the Olympic Stadium
and Aquatics Centre
in Stratford.
Pictures: GETTY/
ACTION IMAGES/ PA
feeling that this is an Olympic venue. He added: “It’s great to be in the
This is where it is going to take place stadium and to visualise what is
and hopefully where I will win one going to be taking place in two years.
more Olympic gold medal. These kids are all very excited about
“Just looking up at the stand and the Olympics. People in London will
even the cheers from the construction have that memory for the rest of their
workers, you can feel what it will be lives.”
like when it is full to the rafters and Coe and Boris Johnson later joined
being in an Olympic final. You can Sports Minister Hugh Robertson and
really sense it is getting more enthusi- British Olympic chairman Colin
astic – two years to go, I can’t wait.” Moynihan to launch an appeal for
In a race started by London 2012 70,000 volunteers to work at the
chief Seb Coe, Michael Johnson was Games, while a day-long celebration
beaten by a cluster of excited school event with interactive games for the
children at the Olympic Stadium. public took place at Trafalgar Square.
to victory to go one better than his sil- medal right here.”
ver medal in Gothenburg four years Elsewhere, British sprint trio
ago. “To wait for four years after last Dwain Chambers, Mark
time is not easy,” said Somalian-born Lewis-Francis and James
Farah. “This means so much to me. I Dasaolu cruised through to the
had doubts in the winter when I semi-finals of the 100m, while
thought it wasn’t right, and I had col- Mark Rooney led three
lapsed after a race. more into the semis of
“We [he and Thompson, inset,] were the 400m.
ranked one and two but its not easy to
follow that, you have to work hard and
use the right tactics. It's awesome.”
Aldershot athlete Thompson was
equally delighted, adding: “Before the
race it was a complete rollercoaster
but this season has gone so well.
“To finish second to this guy is an
absolute honour. This is my gold
CITYA.M. 28 JULY 2010 Sport 27

Torres wants to stay,

claims Hodgson, but
Mascherano doesn’t

▲
FOOTBALL
BY FRANK DALLERES
LIVERPOOL boss Roy Hodgson has
given the club a huge boost by
insisting Fernando Torres intends
to stay at Anfield.
The Spain striker, 26, is want-
ed by Chelsea and Manchester
City and Hodgson admitted just
days ago that the star had
“beef” with the club over a lack
of signings. Torres (right), who
has not returned to pre-season
training yet, has not commented
publicly on the matter, adding to
uncertainty over his future.
But Hodgson said: “He has
Ferguson has made two modest additions to his United squad so far this summer. Picture: ACTION IMAGES told us he is looking forward to
Monday, looking forward to
what I know and I would suggest all
other reports are erroneous.”
Keeping Torres at the club would rep-
resent another success for new manager
Hodgson, following the signing of Joe
Cole and captain Steven Gerrard’s deci-
sion to commit himself to Liverpool.
But the former Fulham boss has
admitted Javier Mascherano
wants to quit Merseyside, after
holding talks with the
Argentina midfielder on
Monday.
“Yes, he wants to leave the
club,” he said. “He has made
that perfectly clear. I think he
wanted to leave a year go.”
Inter Milan are thought to want
Mascherano, but Hodgson added:
“The mere fact that the player is a

Sir Alex has money

getting back to work and look- little bit unhappy with his situation
ing forward to playing for and would prefer to leave does not
Liverpool next season. That’s necessarily mean that he will do.”

to spend, say United ETF SECURITIES

CITY TOUCH TOURNAMENT
only for the playmaker to pledge his FRIDAY 6TH AUGUST 2010
Barcelona admit
▲

FOOTBALL
BY FRANK DALLERES
MANCHESTER United chief execu-
tive David Gill insists the club have
deep enough pockets to make one
superstar signing this summer – if
manager Sir Alex Ferguson sees fit.
United have made just two mod-
est acquisitions for next season,
promising Fulham defender Chris
Smalling and Mexico striker Javier
Hernandez, at a combined cost of
around £20m.
Doubt has also been cast on the
spending power at Old Trafford
after 4,000 season tickets were put
on general sale last week, amid
reports that renewals are down as
much as 10,000 on last year.
But Ferguson indicated there
were funds in the coffers when he
enquired after £30m-rated Holland
World Cup star Wesley Sneijder,
Cecil’s Lord Shanakill is up for the
future to Inter Milan.
And Gill said: “The money is
there if we believe there is a player
who can improve what we believe is
a very good squad. The team has
been together for a number of years
and done very well. In order to
improve it a player has to be of a
very high quality.
“We are always looking at play-
ers. We are looking 365 days a year,
it doesn’t just start when the trans-
fer window opens. We are looking
at it. We studied a lot of players at
the World Cup, but we knew about
a lot of them before that.
“Overall I think Sir Alex is very
comfortable with the squad. That’s
not to say something won’t happen,
but I think it is a ‘might’, not a
‘will’. We will see what happens
over the next six weeks.”
UNITED TICKET PROBE: PAGE 3
to loss of £64m
BARCELONA have revealed a loss
of more than £64m for last sea-
son, taking their total debt to
£370m.
The new figures are a further
blow to Barca’s attempts to prise
Arsenal captain Cesc Fabregas
from north London.
The club’s new board says its
predecessors “cheated” when they
announced far healthier figures VENUE:
V E
before the end of their term. HAC | ARTILLERY GROUND
H
President Sandro Rosell was
forced to take out a £130m loan CITY ROAD | LONDON | EC1Y 2BQ
C
earlier this month after failing to
pay players their June wages.
- 3.30PM REGISTRATION,
4.00PM KICK OFF
- PROFESSIONAL PLAYER
COACHING EACH TEAM
- ENTRY FEE – £600 PER TEAM
(+vat; up to 10 members)

Cup in Glorious Goodwood opener - £5 PER SPECTATOR

(all spectator proceeds to charity)

OPPORTUNITY TO MEET THE STARS FROM LONDON’S

▲

GLORIOUS GOODWOOD
BY JON COUCH
LORD SHANAKILL shocked well-
backed favourite Dalghar to win the
Betfair Cup – the big race on the
opening day of Glorious Goodwood.
Ridden by Tom Queally, the 13-2
shot reeled in the French raider
inside the final two furlongs to add
to his morale-boosting victory in
Listed company at Chester earlier
this month.
“He’s a classy horse and people
forget he’s a Group One winner, his
class showed today when it mat-
tered,” Queally said of the Henry
Cecil-trained four-year-old.
“The last day at Chester did his
confidence the world of good. He
takes a couple of strides to go
through the gears, but once he got
there he was flying.”
Lord Shanakill was followed
home by 33-1 chance Cat Junior,
who finished strongly on the out-
side to claim second with Dalghar
settling for third.
Last year’s winner Finjaan and
well-fancied Balthazaar’s Gift were
never in contention.
Champion jockey Ryan Moore
rallied to his 95th win of the season
after riding Jermey Noseda’s inex-
perienced Rebel Soldier to victory
in the Gordon Stakes.
The 4-1 favourite held off
Dandino and Royal Ascot runner-up RUGBY LEAGUE PRO
O CLUBS - HARLEQUINS RL AND
Arctic Cosmos as the leading trio LONDON
NDON SKOLARS
LON
finished in betting order in a race For more information or to enter, contact Howard Kramer on:
marred by a fatal accident to
Frankie Dettori’s mount Film Score.
Winning the race for the third
year in a row, Moore said: “He trav-
020 8888 8488 or e-mail:
elled nicely the whole way round
and quickened up well off a lead.
“He just got a little bit idle and
howardkramer@skolarsrl.com
lonely being out in front from the www.etfsecurities.com | www.quins.co.uk | www.skolarsrl.com | www.londonrl.co.uk
www.e co.uk
two, but it was a nice performance.”
There were also opening day wins IN ASSOCIATION WITH:
for Kieron Fallon on Start Right in
the Summer Season Handicap and a
double for Richard Hughes on
Zebedee and Martyr.